Trump's war on the Fed is escalating
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Illustration: Aïda Amer/Axios
The Trump administration is pursuing wholesale change at the Federal Reserve with a ruthlessness and creativity that few Fed watchers could have imagined.
Why it matters: The president's demands for lower interest rates are not just rhetoric, and his attacks aren't limited to insults of chair Jerome Powell.
- Rather, the administration is pursuing a sophisticated, multifront war to try to install loyalists atop the Fed much faster than normal turnover would allow.
The big picture: Wednesday morning, the top housing finance regulator posted a criminal referral accusing Federal Reserve governor Lisa Cook of mortgage fraud. She allegedly has mortgages on two separate homes, each of which she claims is her primary residence.
- We saw the first glimpses of the strategy last month, with claims that Powell lied to Congress and/or violated the law through changes and cost overruns on the Fed's $2.5 billion renovation project.
- Politico reported Tuesday that President Trump is seeking a lightning-fast Senate confirmation for top White House economist Stephen Miran as a Fed governor — in time for him to push for rate cuts at a policy meeting less than a month away.
Between the lines: Trump and his allies are trying to establish the predicate to fire Fed governors for cause so that they can put in place leadership who will deliver the looser monetary policy Trump demands — and act with less independence from the president's desires going forward.
- In the meantime, they are looking to make life as unpleasant as possible for Powell, Cook, and other Biden-appointed Fed leaders.
Driving the news: Bill Pulte, director of the Federal Housing Finance Agency, posted on X a letter to the attorney general stating that it appears Cook "has falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statutes."
- She took out a mortgage on a Michigan house represented to be her principal residence, and shortly thereafter a loan on an Atlanta condominium that was also described as her principal residence, according to Pulte's letter.
- There is no accusation or evidence that Cook has defaulted on either loan. Pulte has used the same tactic to pursue prominent Trump antagonists, namely California Sen. Adam Schiff and New York Attorney General Letitia James, both Democrats.
- President Trump posted Wednesday morning on Truth Social that "Cook must resign, now!!!" The Wall Street Journal reported that he is considering firing Cook for cause, citing two unnamed sources.
Zoom out: If the new allegations result in Cook resigning or being successfully fired for cause, Trump would move close to his appointees having operating control of the Fed's powerful Board of Governors.
- Miran, once confirmed, will join Michelle Bowman and Christopher Waller as Trump appointees on the seven-person board. With another vacancy, Trump appointees would attain a 4-3 majority.
- That would give Trump appointees power over the Fed system's budgets, staffing, and selection of reserve bank presidents.
Zoom in: Cook's term is not scheduled to expire until 2038, so her successful early removal would advance that goal far ahead of what the calendar would allow.
Of note: The 12 presidents of reserve banks serve five-year terms that are all scheduled to expire at the end of February. The Board of Governors must vote to approve their reappointment.
- In other words, a majority of the Board of Governors could, if it wishes, oust some or all of the bank presidents just a few months from now.
