Trump moves to fire Fed governor Lisa Cook, escalating attacks on the central bank

Good morning and welcome to White House Watch. Today we’re covering:

Donald Trump said he was firing Federal Reserve governor Lisa Cook “effective immediately”, in a stunning escalation of his attacks on the US central bank.

In a letter to Cook posted on social media on Monday night, Trump said there was “sufficient reason” to believe she had made false statements on mortgage agreements, giving him cause to fire her.

The president cited his powers under the country’s constitution and US law to sack the official. “The Federal Reserve Act provides that you may be removed, at my discretion, for cause,” Trump wrote. Cook denied the allegations and said she would not resign.

The president’s move late on Monday marks an extraordinary assault on the independence of the Fed, which sets interest rates that act as a benchmark for trillions of dollars in assets around the world. It triggered a sell-off of long-dated US government bonds and led to falls for the dollar.

The move against Cook follows months of attacks on the central bank’s chair, Jay Powell, and comes just weeks after Trump fired the head of the Bureau of Labor Statistics after a weak jobs report raised concerns about the health of the US economy.

Trump’s move showed how determined he is to gain control of decision-making at the central bank and how willing he is to jeopardise the principle of Fed independence

“This is an extraordinary act of aggression that violates the Fed’s independence,” said Eswar Prasad, a professor at Cornell University. “Trump has now declared open war on the US institutional framework, which underpins the dollar’s dominance in global finance.”

If Cook resists Trump’s move to force her resignation, it could trigger a legal stand-off between the White House and the Fed just as central bankers are weighing an interest rate cut that could come as early as next month.

Legal scholars believe the administration would have to prove there was “cause” to fire Cook by winning a case in court that proved she had committed mortgage fraud and it constituted gross malfeasance.

Cook’s removal would pave the way for Trump to select a replacement governor more amenable to rate cuts. It would be his second opportunity in weeks, after Adriana Kugler announced plans to leave the Fed months before her term was set to end in January.

The latest headlines

What we’re hearing

While Bethlehem, Pennsylvania, stopped producing steel decades ago, the rusted hulk of the Bethlehem Steel Corporation now houses music, recreation and hospitality venues with artisanal manufacturing.

The city is a case study in a successful transition from an industrial past to a productive present. Its voters also shifted hard towards Trump in last year’s election.

To retain power, Republicans will need to keep winning voters in places like Bethlehem, which sits on the faultline of Trump’s divided America. [Free to read]

Bethlehem’s Democratic mayor, J William Reynolds, said the city’s political shift was the result of “decades of a lack of trust and faith in government, in the public sector and in what is possible for communities when people are working together”.

Local Republicans say the answer is simpler: Democrats abandoned blue-collar voters and Trump promises to make their lives better.

Glenn Geissinger, chair of the Northampton County Republican Committee, had his own explanation for Trump’s increased popularity in a city where unionised steelworkers were once Democratic party stalwarts. The party had been captured by “intellectual elites” to appeal to the “college-educated white voter”, he said, leaving others behind.

Geissinger said he and his fellow Republicans had been “very pleased” with Trump’s presidency: “We wanted safer streets, we’re getting it. We wanted proper immigration, we’re getting it.”

But Reynolds, the mayor, said the political lessons of Bethlehem’s steelmaking past and prosperous present were being undermined by the Trump administration’s anti-migrant policies. “This largely blue-collar city welcomed immigrants from throughout the world,” he said.

Leading up to the 2028 president election, the Financial Times will report extensively from Bethlehem, where the city’s rightward drift, demographic make-up, industrial history, political divisions and ambitions should offer a glimpse of America’s mood. — Stephanie Stacey

Viewpoints