Does Trump have the Power to Sack a Federal Reserve Governor?

Does Trump have the Power to Sack a Federal Reserve Governor?


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President Donald Trump has demanded the removal of one of the governors of the US central bank, a move that escalates his long-running feud with the institution.

Late on Monday, he posted on his Truth Social account a letter addressed to Lisa Cook, saying she was being removed from the Federal Reserve Board of Governors due to mortgage fraud allegations.

The move has caused an outcry from Democrats who say it amounts to unprecedented political interference.

Who is Lisa Cook and what does she do?

Ms Cook was appointed as governor of the Federal Reserve in 2022 by Democratic President Joe Biden, becoming the first African American to serve in the role. Her term was due to end in 2038.

She previously served on Barack Obama's Council of Economic Advisers and worked at the US Treasury.

There are seven governors on the board of the Fed and they play a key role in setting the monetary policy of the US.

They make up the majority of the committee that decides the level of US interest rates and aims to keep prices stable and unemployment as low as possible.

Ms Cook has voted in recent months to keep interest rates on hold this year.

What has Trump accused Lisa Cook of?

In his Truth Social post, the president cited allegations that Ms Cook may have falsified records to obtain a mortgage.

He said she signed two documents, two weeks apart, attesting that two homes in different states were both her primary residence.

"It is inconceivable that you were not aware of your first commitment when making the second. It is impossible that you intended to honor both," he wrote.

CNN has obtained and reviewed the mortgage documents in question and found she did claim two primary residences but it is unclear whether she informed either lender of the fact.

Ms Cook has not been charged with any wrongdoing and in a statement she said she would fight her dismissal because Trump did not have just cause to fire her.

What does the Fed do?

As the central bank of the US, the Federal Reserve is responsible for running the nation's monetary policy, promoting stability in the financial system, regulating institutions and other tasks.

One of the most visible activities it undertakes is to set interest rates. This has a big impact on the nation's financial conditions by influencing how much money people can borrow.

The Fed functions as a federal agency and is considered to be independent within government - its decisions do not require the president's approval, though it is accountable to Congress.

Can Trump actually fire her?

This question could become the subject of an intense legal battle.

The Federal Reserve Act does not give the president license to remove a Fed official at will but, as Trump noted in his letter to Ms Cook, it does allow him to do so "for cause".

Trump cited a "criminal referral" against Cook - after his ally, the housing finance regulator, recently called for Ms Cook to be investigated for mortgage fraud. But it is not clear whether an investigation has been opened, and Ms Cook has not been charged with any crime.

As well as Ms Cook's denial that there is any cause to sack her, legal experts have shown scepticism. 

Shan Wu, a former federal prosecutor, told CNN: "As of right now, I think it's kind of questionable for cause, but obviously that's what [Trump] is relying on, and I would expect her to challenge it."

Market reaction to Trump's move has been relatively tame so far - as investors, too, appear to be sceptical and are waiting to see if the sacking actually comes to pass.

Why does Trump want lower interest rates?

Trump has spent much of his second presidency putting pressure on the Fed, demanding that Powell cut interest rates to lower the cost of borrowing for American businesses and consumers. The target range is currently 4.25 to 4.5%.

Central banks typically cut rates in an effort to boost growth. But there is a balancing act, because higher interest rates help to keep inflation in check. Tackling inflation is another Trump priority.

Lower rates can also help US exporters and easing trade deficits is a central plank of Trump's economic policy.

Powell has so far steadfastly refused to reduce rates since Trump took office, but has hinted at a cut in September.


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