Original title: (A historic first! Trump 'fires' current Federal Reserve governor, taking another step towards 'controlling the Federal Reserve')

Original author: Zhu Xueying, Wall Street Journal

Trump has just made a significant move! He announced on social media that the dismissal of Federal Reserve governor Lisa Cook is 'effective immediately'.

This unprecedented move has shaken the financial markets, leading to widespread skepticism. U.S. stock index futures fell sharply, with the Nasdaq 100 index contract down 0.2%, and risk-averse sentiment drove the yen up against the dollar, while gold recovered some earlier losses.

If Trump's move succeeds, it will bring him one step closer to 'taking control of the Federal Reserve'. If Cook resigns, it will allow Trump to potentially gain four seats, giving him a majority on the seven-member board. Trump has appointed two of the current governors during his first term and recently nominated his economic advisor council chairman Stephen Miran to fill the third seat vacated early by Biden-appointed Adriana Kugler.

In response, Nick Timiraos, a reporter for the Wall Street Journal known as the 'New Federal Reserve Communications Agency', analyzed in his latest article that Trump has already appointed two members to the seven-member Federal Reserve board. If he gains two more nomination seats, he will have a majority, potentially fundamentally reshaping the entire Federal Reserve system.

According to Timiraos' analysis, if Trump gains a majority on the Federal Reserve board before March next year, they may refuse to reappoint regional Federal Reserve presidents, thereby achieving control over the FOMC meetings.

The unprecedented dismissal shocked Wall Street.

In his letter, Trump accused Cook of engaging in 'fraudulent and potentially criminal behavior' in financial affairs, claiming such actions have undermined her credibility as a regulator.

In the letter, citing Article II of the U.S. Constitution and relevant provisions of the Federal Reserve Act enacted in 1913, Trump stated that he has determined there is sufficient reason to revoke Cook's position. The letter mentioned a criminal referral submitted by the FHFA on August 15, suggesting Cook allegedly made false statements in mortgage documents. For example, she first declared the property as her primary residence in a document in Michigan and then made the same declaration in another document in Georgia. Trump called this 'unimaginable,' questioning her integrity and competence as a financial regulator.

Trump's threat to dismiss Cook marks a significant escalation of the White House's pressure on the Federal Reserve. If Trump successfully removes Cook, it will set a historical precedent in the United States—no sitting Federal Reserve governor has ever been dismissed by a president, raising market concerns about a potential constitutional crisis and increased market turmoil.

In previous political conflicts, even the fierce confrontation between President Johnson and Federal Reserve Chairman William McChesney Martin, or President Nixon's pressure on Arthur Burns, did not result in any actual dismissal actions.

New Century Advisors chief economist and former Federal Reserve economist Sam (Claudia Sahm) once stated,

'This is the current administration's attempt to control the Federal Reserve using every means available to achieve such control.'

Does the president have the power to dismiss Federal Reserve governors? Yes, but with conditions.

Legal experts emphasize that the Federal Reserve Act clearly states that governors 'can be dismissed by the president for cause', but this requires concrete evidence of misconduct, such as negligence, malfeasance, or failure to perform duties, rather than political motivation.

Although previously, Federal Housing Finance Agency (FHFA) director Bill Pulte accused Cook of lying in loan applications to obtain more favorable terms, allegedly involving mortgage fraud, the charges against Cook have not yet been confirmed by the courts, and the Department of Justice has only stated it will investigate the relevant allegations.

Previously, Trump posted a photo of Cook marked with a red cross on his social media platform Truth Social, calling her a 'fraud'. Cook is the first Black woman on the Federal Reserve board, having joined in 2022. Massachusetts Senator Elizabeth Warren condemned Trump's actions on social media as 'illegal and politically motivated'.

Trump's 'three-step plan' to take control of the Federal Reserve is being gradually implemented.

Some analysts believe that if Cook resigns, Trump will have the opportunity to appoint a fourth Federal Reserve governor, gaining a majority on the seven-member board. Trump has already appointed two of the current governors during his first term and recently nominated his economic advisor council chairman Stephen Miran to fill the third seat vacated early by Biden-appointed Adriana Kugler.

On August 24, Nick Timiraos, a reporter for the Wall Street Journal known as the 'New Federal Reserve Communications Agency', analyzed in his latest article that Trump has already appointed two members to the seven-member Federal Reserve board. If he gains two more nomination seats, he will have a majority, potentially fundamentally reshaping the entire Federal Reserve system.

In addition, Timiraos analyzed that if Trump gains a majority on the Federal Reserve board before March next year, they may refuse to reappoint regional Federal Reserve presidents. Dismissing those who are performing their duties would break decades-long precedents and breach the critical firewall that has protected its independence since the Federal Reserve's establishment in 1913.

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