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U.S. President Donald Trump removed Fed Governor Lisa Cook on Monday over mortgage corruption allegations, marking the first direct intervention by a president against a sitting Fed governor.
In a letter to Cook, Trump invoked provisions of the Federal Reserve Act, stating that her conduct showed "gross negligence in financial transactions" and raised doubts about her “competence and trustworthiness” as a financial regulator. The move followed a referral by the Federal Housing Finance Agency (FHFA) to the U.S. attorney general earlier this month, alleging that Cook may have provided false statements in mortgage agreements.
Cook, who joined the Fed board in May 2022 and was reappointed in September 2023 for a term running until 2038, also sat on the Federal Open Market Committee (FOMC), which sets U.S. interest rates.
While the Federal Reserve has not yet responded to Trump’s announcement, under a recent Supreme Court ruling, Fed governors can only be removed "for cause," a term typically understood to mean misconduct or dereliction of duty. Trump’s reliance on the FHFA referral is expected to intensify debate over whether the dismissal meets that standard.
The president has repeatedly clashed with Fed Chair Jerome Powell, criticizing him for not cutting interest rates more aggressively despite muted inflation.
The Fed has kept its benchmark rate unchanged in a range of 4.25% to 4.5% since the last reduction in December, while Powell’s speech at the Jackson Hole Symposium was seen as a dovish signal ahead of the September meeting, boosting expectations of a rate-cut cycle in global markets.
Financial markets reacted quickly to concerns over the central bank’s independence.
On Wall Street, the S&P 500 closed down 0.4%, the Dow Jones Industrial Average slipped 0.8%, and the Nasdaq Composite lost 0.2%. In Asia’s Tuesday session, Japan’s Nikkei 225 recorded the steepest decline, falling more than 1%, while Hong Kong’s Hang Seng dropped 0.3% and Shanghai’s benchmark retreated 0.2%.
Gold prices surged to a two-week high of $3,385 per ounce, while Brent crude slipped 0.4% to $68.51 and U.S. benchmark West Texas Intermediate (WTI) fell 0.5% to $64.46. Bitcoin also weakened, down 1.7% to $110,268, while ether fell more sharply by 5.3% to $4,426.
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