A shocking news report — Trump demanded the resignation of Federal Reserve Governor Cook on the grounds of 'loan fraud allegations' — the Federal Reserve is gradually being dismantled by Trump. Cook was nominated by Biden to be a Federal Reserve Governor, taking office in 2022 with a term until 2038.
The incident originated when the Director of the Federal Housing Finance Agency, Pruitt (a person from Trump's camp), revealed on social media that Cook applied for loans on two houses in 2021, both labeled as 'primary residences,' allegedly involved in mortgage fraud. The name — Pruitt — is not unfamiliar to the market. In July of this year, he called for Congress to investigate Powell, accusing the Federal Reserve of misleading Congress regarding headquarters renovation projects. Now he's targeting Cook, which is clearly not 'a mere coincidence.'
Trump immediately followed up by saying, 'Cook must resign immediately!' Cook's response was very firm: 'Undoubtedly forced to resign.'
Trump told aides that if Cook did not resign, then they would consider firing her. According to the law, the president cannot arbitrarily dismiss a Federal Reserve Governor unless 'malfeasance or serious misconduct' can be proven. The question is — if the so-called 'violations' occurred before she took office, do they still count? Many legal experts feel this reasoning is too far-fetched. The Supreme Court emphasized this year that the Federal Reserve is a 'special semi-independent institution,' and presidential power is not that great.
Looking at it now, the recent sudden resignation of another Federal Reserve Governor, Kuggler, is not 'purely coincidental.'
This incident has brought a huge shock to the market — the dollar plummeted instantly, gold surged by as much as $30, and the U.S. stock market immediately recovered most of its opening losses — this scene is reminiscent of the market reacting to interest rate cuts. The dollar will have a 'risk discount' because a decrease in central bank independence equals a weakening of monetary credit. This is not a singular event. On the surface, Trump may hope to continue securing a governor position, placing his people inside the Federal Reserve. But the bigger impact is that other Federal Reserve officials may be less daring to make 'hawkish statements' — if even Federal Reserve governors can be targeted by political forces, then other officials will inevitably speak more cautiously (the space for hawkish rhetoric will be compressed), which will cause the market to 'automatically lean dovish,' even if the economic data itself does not support it. This is more 'long-term' than a one-time announcement of rate cuts/increases.
Last week, Trump harshly criticized Goldman Sachs CEO, saying 'You should go back to being a DJ,' already making Wall Street hesitant to publicly bearish on the U.S. stock market and economy.
What is truly intriguing is the 'timing of the revelation' — it occurred two days before Powell's speech at Jackson Hole, as if Trump knew beforehand what Powell was going to say.#名人MEME热潮
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