Trump’s threat to Fire Fed cook has Wall Street’s accounting compared to the intervention

Yesterday, President Trump said that he had “withdrawn” the governor nourished at his post, alleging “there are enough reasons to believe that (Cook) may have made false declarations on one or more mortgage agreements”.

This decision was made after Bill Pulte, the agency head who regulates mortgage giants Fannie Mae and Freddie Mac and one named by Trump, alleged on the social media site X that Cook had claimed two main residences (in Ann Arbor, Michigan and Atlanta) in 2021 in order to guarantee better mortgage conditions.

Cook retaliated to the questions, saying in a press release: “I have no intention of being intimidated to leave my position due to certain questions raised in a tweet.”

However, she added: “I intend to answer my questions seriously about my financial history as a member of the federal reserve and I therefore collect precise information to answer all legitimate questions and provide the facts.”

Remove Cook from its headquarters is to offer the White House an opportunity: replacing it with a more dominant economist, open to the way of thinking President Trump on monetary policy.

COOK – First appointed by President Biden – has so far supported the majority of the FOMC in the decision to maintain the basic rate at its current level of 4.25% to 4.5%, a decision that exasperated the White House. Indeed, he made Trump so angry that he threatened to dismiss Jerome Powell for his “too late” approach to the basic rate.

Trump also celebrated when another FOMC member Adriana Kugler resigned earlier this summer and opened a place for a member nominated to Trump. Stephen Moran was appointed temporary economist in the role, with more closely concentrated eyes on the individual that the president should appoint to replace Powell in 2026.

The battle between the White House and the Fed (undoubtedly unilateral, because the Fed tries to direct the policy well) means that many analysts position Trump’s last action as an additional intervention in the Central Bank – whose autonomy is very appreciated by financial institutions around the world.

The legality of the dismissal remains questionable, Paul Donovan of UBS said to his customers this morning, adding: “The attempt is completely unprecedented. In the context of Trump’s recent comments, whether or not the president thinks that action is justified is not relevant. Investors can only conclude that it is an attack on the independence of the federal reserve. ”

There are obstacles to layoffs, underlines Donovan, in that Trump has already appointed the majority of Fed governors, including its president, and “Fed policy has been independent, so far”.

In addition: “If the dismissal resists the courts, the Senate must confirm a successor. The FOMC contains regional presidents of the Fed who can aim for an independent policy, and faith in these controls can limit the negative reaction of the short -term market.

Market reaction

“With Trump’s move considered an additional escalation of the US attempts to exert an influence on the Fed, the dollar saw a drop of almost -0.4% on the news,” Jim Reid wrote Deutsche Bank this morning. That said, the decline has largely reversed in the following hours.

Other asset classes have also changed, gold has increased by 1% and maintained most of the gain, while the S&P 500 and the Nasdaq fell. “Meanwhile, the treasure curve experienced a large box, the 2 -year -old yield of -0.7 SBPS lower but the 10 years up + 2.9 SBPS and 30 years + 4.5 pb at 4.93%,” added Reid.

Skanda Amarnath, executive director of Employe America and former Fed economist, said Fortune: “Demolition with illegal behavior and pathetic power captures come with the costs for Americans. The dollar continues to weaken while American governance continues to erode. This means higher prices for all products.

At the other end of the spectrum, the professor of Wharton, Jeremy Siegel, sees the debate on the position of Cook as a short -term title as opposed to a more important economic fundamental: the path of American monetary policy in the longer term.

Powell’s speech to Jackson Hole, Siegel wrote for Wisdomtree where he is a main economist, “was an appropriate and long -awaited pivot”. He continued: “Politically, the situation around … Cook adds noise but little substance. His potential eviction, or replacement, will not materially modify the policy, especially now that Powell has reported his intention.

“Trump’s influence can be looming in public speech, but operationally, the Fed has already turned the corner. The most important question is whether Powell will cut quickly enough to meet political demands. A negative imprint for jobs could speed up the pace.”