Seeking to Control the Fed, Trump Risks Upending a Pillar of the Global Economy
President Trump’s attempt to fire Lisa Cook, a Fed governor, will set off a long legal battle. Economists warn it could lead to higher inflation and government borrowing costs.
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President Trump’s attempt to fire Lisa Cook, a Federal Reserve governor, creates more uncertainty at a critical moment for the central bank.Credit...Doug Mills/The New York Times
  
By Ben Casselman Colby Smith and Tony Romm
Aug. 26, 2025 Updated 12:24 p.m. ET
In his monthslong battle to take control of the Federal Reserve, President Trump has tried threats, name-calling and — in one particularly memorable news conference with a hard-hat-wearing Jerome H. Powell — public humiliation. But he has always stopped short of the step that advisers warned could roil financial markets and upend a pillar of the global economy: attempting to fire a Fed official.
On Monday evening, he took that leap.
Mr. Trump’s target was not Mr. Powell, the Fed chair, at least for now. Instead it was Lisa Cook, one of the Fed’s six other governors. The president, in a letter, said he was removing Ms. Cook “for cause,” citing allegations of mortgage fraud. Ms. Cook has not been charged with any crime.
Peter Conti-Brown, an expert on Fed governance at the University of Pennsylvania, said her firing, if successful, would mark “the end of central bank independence as we know it.”
In the short term, Mr. Trump’s attempt to fire Ms. Cook creates more uncertainty at a critical moment for Fed policy. Ms. Cook has vowed to fight her ouster, and on Tuesday her lawyer promised to file a lawsuit challenging what he called an “illegal action.” Legal experts say she has a strong case given that she hasn’t been convicted of a crime and the fraud allegations involve her private conduct, not her work at the Fed.
That sets up the potential for a protracted legal battle between Ms. Cook and the president, which almost certainly won’t be resolved before the Fed’s next meeting in mid-September, and perhaps not for many meetings after that. It is possible that the Republican-controlled Senate could confirm a replacement for Ms. Cook while she is still fighting for her seat, a standoff with no precedent in the Fed’s century-long history.
In the longer run, if Mr. Trump succeeds in replacing Ms. Cook, he will have reshaped the central bank in a way hardly anyone thought possible before last week.
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For all the attention on Mr. Trump’s fight with Mr. Powell, it was always clear that the president would get to name a new Fed chair when Mr. Powell’s term ends next spring. Mr. Trump was also expected to get to fill another seat on the board in January — though that seat came open several months early when Adriana Kugler unexpectedly resigned this month.
Ms. Cook with Jerome H. Powell, left, the Fed chair, in 2023. If Mr. Trump is able to fire Ms. Cook, that raises the possibility he could fire other Fed officials as well.Credit...Kendrick Brinson for The New York Times
But Ms. Cook’s term does not end until 2038, long after Mr. Trump will have left office. If he is able to fill both her seat and Ms. Kugler’s, he will have appointed a majority of the Fed’s seven-member board even before Mr. Powell steps down as chair.
And if Mr. Trump is able to fire Ms. Cook, that raises the possibility he could fire other Fed officials as well if they refuse to approve the interest rate cuts that he has demanded.
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Aug. 26, 2025, 1:21 p.m. ET41 minutes agoOfficially, the president said he was firing Ms. Cook “for cause” over alleged false statements she made in obtaining two mortgages in 2021, before she joined the Fed. Bill Pulte, the director of the Federal Housing Finance Agency, first made those allegations on social media last week and subsequently referred the matter to the Justice Department, which opened an investigation.
But Mr. Trump has made little secret of his true aim: taking control of the Fed.
“It’s a mistake to see this as being about Lisa Cook,” said Lev Menand, a professor at Columbia Law School who studies the Fed. “He’s trying to take control of the Board of Governors by pushing out, and throwing the full force of the federal government, against them, to scare them into resigning.”
Economists warn that if Mr. Trump succeeds in pressuring the Fed into cutting rates, it could lead to faster inflation in the short run and make it harder for the central bank to manage the economy in the long run, as businesses, investors and consumers lose confidence that policymakers are focused on making decisions based on evidence rather than politics.
“It seems clear that President Trump is working to undermine the independence of the Fed, which would lead to worse economic performance and higher inflation,” said Alan Blinder, a Princeton economist and former Fed vice chair. “What American wants that?”
Economists have long warned that attempting to oust Fed officials could also cause panic in financial markets, particularly among bond investors, who count on the Fed to keep inflation low and the financial system stable. The threat of bond market turmoil has been one of the principal arguments that advisers to Mr. Trump have used to dissuade him from firing Mr. Powell in the past.
So far, however, Mr. Trump’s attempt to fire Ms. Cook has generated little reaction in financial markets. Yields on the 10-year Treasury note — which reflect the interest rates that investors demand to lend the government money — fell on Tuesday. That raised fears that Mr. Trump could be emboldened to take further steps to intervene in the Fed.
“If bond markets don’t worry, he’s going to keep going,” said Mark Spindel, chief investment officer at Potomac River Capital, who co-wrote a book on central bank independence.
Mr. Trump appears to be growing bolder in his attempts to take control of previously independent economic institutions, Mr. Spindel said. Early this month, he fired Erika McEntarfer, the head of the Bureau of Labor Statistics, after her agency reported unexpectedly weak jobs numbers.
“Look at August,” he said. “How did August start? He fired the head of the B.L.S. How is August ending? He fired a sitting governor.”
The administration’s attack on Ms. Cook appeared to be timed to cause the maximum amount of disruption inside the Fed, landing just as central bankers from around the world were beginning to gather in Jackson, Wyo., for one of the most closely watched conferences of the year.
Mr. Powell and other Fed officials tried to keep the conference focused on the state of the economy and policymakers’ response to it. But from the start, it was overshadowed by the threats originating from the White House.
The irony of the timing is that Mr. Trump is stepping up his attacks on the Fed just as policymakers appeared poised to begin giving him the rate cuts he has long demanded. In his speech at the Jackson Hole conference on Friday, Mr. Powell gave his strongest indication yet that the central bank was ready to resume rate cuts as early as next month.
Ben Casselman is the chief economics correspondent for The Times. He has reported on the economy for nearly 20 years.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
See more on: U.S. Politics, Jerome Powell, Donald Trump, Federal Reserve (The Fed)
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