Trump dismisses Fed governor Cook over mortgage loan controversy

In a letter made public on Monday, Trump accused Cook of “deceitful and criminal conduct” related to mortgages she obtained in Michigan and Georgia in 2021, when she reportedly declared both properties as her primary residence.

Trump argued this undermined her integrity and competence as a financial regulator, saying he had the authority to dismiss her under the US Constitution and the Federal Reserve Act.

Cook, who was appointed to the Fed board in 2022 by then-President Joe Biden and whose term was set to run until 2038, has not yet given a detailed explanation of the transactions.

The matter was flagged by Federal Housing Finance Agency director William Pulte, who referred it to Attorney General Pamela Bondi for investigation. Neither Cook nor the Federal Reserve offered an immediate response.

While the Fed’s structure is designed to shield governors from political pressure, the law does allow removal “for cause.” No president has ever tested this clause, and legal experts say the case could open a new constitutional battle over the Fed’s independence.

Financial markets reacted sharply. US stocks closed lower, while the Treasury yield curve steepened, short-term yields fell, suggesting bets on rate cuts, but long-term yields rose, reflecting fears that inflation-fighting credibility could erode.

Critics see the dismissal as part of Trump’s broader push to reshape the Fed’s leadership and exert influence over monetary policy. Analysts warn it could undermine confidence in the world’s most influential central bank.

“This signals the administration’s determination to reshape the Federal Reserve and puts Biden’s other appointees on notice,” said Tim Duy of SGH Macro Advisors, adding that future policy could tilt more dovish.

The removal also comes as the Trump administration continues its campaign against diversity and equity initiatives in government, a drive that has already pushed several high-profile women and minority officials out of office.

Cook had previously vowed not to resign under pressure, saying last week: “I have no intention of being bullied to step down because of questions raised in a tweet.”

The Federal Reserve is due to hold its next policy meeting on September 16–17, but Cook’s departure is likely to accelerate Trump’s remaking of the institution. He has already promoted Governor Michelle Bowman to chief bank regulator and is considering Christopher Waller, his 2020 appointee, as a possible successor to Chair Jerome Powell, whose term ends in May.

Reuters