The Zhitong Finance App learned that the White House said this week that US President Donald Trump is “considering” firing Federal Reserve Governor Lisa Cook. This move marks Trump's reinitiation of the removal process of Biden's appointed director after the US Supreme Court temporarily blocked his dismissal order in June. Meanwhile, there are reports that Trump has spoken with Kevin Walsh many times since he was confirmed by the Senate as chairman of the Federal Reserve in May. The independence of the Federal Reserve is being tested as never before.
White House presidential assistant Dan Scavino said in a letter to Cook on Wednesday that there are “good reasons to believe” Cook made false statements in one or more mortgage agreements. The accusation is the same as when Trump and his allies first tried to fire Cook last year. Cook denied the charges and filed a lawsuit against his dismissal.
While the lawsuit was ongoing, the US federal court blocked Trump's decision to fire Cook. At the end of June, the US Supreme Court upheld the ruling with a 5-4 vote and rejected Trump's application to “suspend execution of the lower federal court ruling.” The ruling was viewed by outsiders as defending the Federal Reserve's much-cherished independence in the face of unprecedented challenges.
But Chief Justice John Roberts stated that the court ruling did not stop Trump from once again trying to fire Cook on mortgage fraud charges. Roberts said any new dismissal attempt would require additional measures to protect Cook's constitutional due process rights.
Scavino said he sent the letter on Wednesday “based on the Supreme Court's opinion” and asked Cook to submit explanations and relevant evidence within three weeks.
Cook's lawyer Abe Lowell immediately issued a statement pointing out that the accusations were “as unfounded as when President Trump tried to remove Cook and interfere with the independence of the Federal Reserve a year ago.” Lowell stressed: “Whatever the president takes next, the facts and Supreme Court case law are clear — there is no legal reason to dismiss Governor Cook. We will continue to challenge this latest excuse to defend her position and the Federal Reserve's historic role.”
Cook was appointed by former President Joe Biden in 2022 and will serve until 2038. Trump's initial attempt to fire Cook comes at a time when he is putting more pressure on the Federal Reserve and demanding drastic interest rate cuts. The market is generally concerned that this move could set a dangerous precedent and make monetary policy decisions more at risk of political interference. Notably, since the Federal Reserve was founded in 1913, no US president has successfully removed a Federal Reserve member.
Meanwhile, frequent private calls between Trump and Federal Reserve Chairman Kevin Walsh are triggering a new round of questions about the independence of the Federal Reserve.
The media reported on Wednesday that since Walsh was confirmed by the Senate in May, the two have spoken on topics such as the impact of the Iran war on the economy and the rapid rise of artificial intelligence. This communication model breaks the recent practice of maintaining formal, limited contact between the president and the chairman of the Federal Reserve.
It is unclear whether the two have discussed monetary policy, but Trump has long called for a sharp cut in interest rates from the Federal Reserve. Trump's push to influence monetary policy is arguably the strongest intervention in central bank decisions in decades.
The non-farm payrolls data released by the US on Friday fell short of expectations, reducing market bets on the Federal Reserve's tightening monetary policy. Traders currently believe that the probability that the Federal Reserve will raise interest rates next month is about 40%, far lower than the 60% rate before the report was released.