By Euronews with AP
Published on
•Updated
ADVEReadNOWISEMENT
US President Donald Trump said on Monday night that he’s firing Federal Reserve Governor Lisa Cook over mortgage fraud allegations, an unprecedented move that escalates a battle against the nation’s central bank, one of the few remaining independent agencies in Washington.
In a letter posted on his social media platform Truth Social, Trump said he is removing Cook from her position, “effective immediately,” as he says he has sufficient evidence that Cook made “false statements on one or more mortgage agreements.”
Bill Pulte, a Trump appointee and the head of the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week. He alleged Cook had claimed two primary residences in 2021 to get better mortgage terms.
Trump’s move could likely trigger a lengthy legal battle that will probably go to the Supreme Court and could disrupt financial markets, potentially pushing interest rates higher.
The independence of the Fed is considered critical to its ability to fight inflation because it enables it to take unpopular steps like raising interest rates. If bond investors start to lose faith that the Fed will be able to control inflation, they will demand higher rates to own bonds, pushing up borrowing costs for mortgages, car loans and business loans.
If Cook, the first black woman to serve on the Fed’s board, is forced off, it would provide Trump an opportunity to appoint a loyalist. The US President has said he would only appoint officials who would support cutting rates.
No president has sought to fire a Fed governor before, as in recent decades, they have largely respected Fed independence.
At most, former US Presidents Richard Nixon and Lyndon Johnson exerted heavy pressure on the Fed, mostly behind closed doors. That pressure to keep interest rates low, the same goal sought by Trump, has been widely criticised for contributing to the surge in inflation in the late 1960s and 70s.
Cook, who was appointed to the Federal board in 2022 by former US President Joe Biden, has not yet provided a detailed account of the transactions.
Trump’s announcement comes just days after Cook emphasised she would not leave her post after Trump called for her resignation on social media.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said in a previous statement issued by the Fed.
Senate Democrats had expressed support for Cook, who has not been charged with wrongdoing.