A piece of news shocked the world—Trump demanded the resignation of Federal Reserve Board member Cook on the grounds of "loan fraud allegations". Behind this, it seems Trump is gradually dismantling the independence of the Federal Reserve.
Cook is a Federal Reserve Board member nominated by Biden in 2022, with a term originally set to last until 2038. The catalyst for this turmoil was the director of the Federal Housing Finance Agency from Trump's camp, Pulte. He revealed on social media that when Cook applied for loans on two houses in 2021, he wrote them off as "primary residences", allegedly committing mortgage fraud.
This Pulte is not unfamiliar. In July of this year, he called for Congress to investigate Fed Chair Powell, accusing the Fed of misleading Congress on its headquarters renovation project. Now he has turned his attention to Cook, which is clearly not a coincidence.
Trump immediately followed up with a statement: "Cook must resign immediately!" But Cook was defiant: "I will never be forced to resign."
Even more aggressively, Trump told aides that if Cook does not resign, he would consider firing her. However, under the law, the president cannot casually dismiss a Federal Reserve Board member unless he can prove "misconduct or serious impropriety." The issue is that the so-called "violation" occurred before Cook took office; this reasoning seems tenuous even to legal experts. The Supreme Court emphasized this year that the Federal Reserve is a "special semi-independent agency", and presidential power is not that extensive.
Interestingly, another Federal Reserve Board member, Kugler, recently resigned suddenly, which is probably not a coincidence.
This turmoil has directly stirred global markets:
The dollar plummeted instantly.
Gold once surged by 30 dollars.
The U.S. stock market quickly recovered most of its opening losses.
This scene is reminiscent of the market speculating about interest rate cuts. After all, a decrease in central bank independence means a weakening of monetary credibility, and the dollar is likely to experience a "risk discount".
The more profound impact is that Trump may want to install his own people in the Federal Reserve. Other Fed officials may reign in their "hawkish rhetoric"—if even board members can be targeted by political forces, who would dare to speak out easily? This will cause the market to "automatically lean dovish" and have a longer-lasting impact than a single interest rate cut.
In fact, there were early signs. Last week, Trump harshly criticized Goldman Sachs CEO, saying, "You should go back to being a DJ", which made Wall Street hesitant to openly bet against U.S. stocks and the economy.
The most intriguing aspect is the timing of the revelation—just two days before Powell's speech in Jackson Hole, as if Trump already knew what Powell was going to say. This struggle surrounding the Federal Reserve is likely just beginning.
Intra-day focus:$ASR $SCR $NEO
