Trump Accelerates Control of US Fed "Will Occupy Majority of Board"

[Financial News]  Donald Trump, the President of the United States, who has been demanding a rate cut from the Federal Reserve (Fed), the US central bank, predicted that he could soon fill the majority of the Fed board with individuals loyal to the government.

Trump mentioned Lisa Cook, a Fed director he announced he would fire the day before, during a cabinet meeting held at the White House in Washington, DC, USA, on the 26th (local time). He said about Cook's successor, "We will have a very good person in that position." Trump explained, "I have someone in mind, but I will deal with this issue with many people, including Scott (Besant, Treasury Secretary) and Howard (Lutnick, Commerce Secretary)," and "It is a very important decision." Trump said, "We will be very satisfied with the person in that position, and very soon we will occupy the majority (on the board)," and "It will be a great thing."

On the 25th, Trump posted a dismissal notice on social media Truth Social stating that he was firing Cook. In the document, he stated that he was immediately dismissing Cook from her position as director based on the authority granted by Article 2 of the US Constitution and the Federal Reserve Act of 1913. This month, the Federal Housing Finance Agency (FHFA) in the US raised allegations of mortgage fraud against Cook, stating that she received a mortgage for a home purchase in 2021 for residential purposes but rented out the property.

Trump emphasized during the cabinet meeting on the 26th, targeting Cook, "It seems like a (law) violation, and that shouldn't happen because he is responsible for the mortgage (which affects interest rates)."

The New York Times (NYT) anticipated legal controversy over whether the president, who leads the government, has the authority to dismiss directors of the independent government agency, the Fed. According to the Federal Reserve Act, the president can dismiss a director for "cause," which is usually interpreted as neglect of duty or misconduct.

The Fed stated in a statement on the 26th, "The long terms and removal restrictions for directors serve as important safeguards, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people." It further suggested that it cannot acknowledge Cook's dismissal, stating, "The Fed will perform its duties as prescribed by law."

The Fed board, consisting of seven members, has two vacancies due to this dismissal. Earlier this month, when former Fed director Adriana Kugler voluntarily resigned, Trump nominated his close aide, Stephen Miran, chairman of the White House Council of Economic Advisers (CEA), as her successor.

Previously, Trump argued that Fed Chairman Jerome Powell should be dismissed after the Fed held the benchmark interest rate steady five times this year due to concerns about inflation. Having already appointed Miran to the Fed board, Trump's dismissal of Cook allows him to nominate another loyalist as a Fed director. If Trump, who started his second term this year, proceeds with new director nominations, he could fill the Fed board with his appointees, excluding Powell and two directors. Fed directors always have voting rights in the Federal Open Market Committee (FOMC) meetings related to interest rates. The Wall Street Journal (WSJ) analyzed that David Malpass, former president of the World Bank (WB), is a strong candidate for the new Fed director.





pjw@fnnews.com Park Jong-won Reporter