'Facing The Most Severe Challenge' to Fed Independence in Generations: Lawrence H. Summers

The Trump administration is reviewing options for exerting more influence over the Federal Reserve’s 12 regional banks that would potentially extend its reach beyond personnel appointments in Washington, according to people familiar with the matter.

President Donald Trump’s move on Monday to oust Fed Governor Lisa Cook, if it holds up in court, would give him an opportunity to secure a majority on the seven-person Board of Governors. But the central bank’s Federal Open Market Committee, which is responsible for setting interest rates, also includes five regional bank presidents who — unlike the governors — aren’t nominated by the White House or confirmed by the Senate.

Scrutiny from the administration of the process for selecting and reappointing reserve bank presidents — responsibility for which is shared between the private-sector boards of those banks and the Board of Governors — would mark another extraordinary step in Trump’s ongoing campaign to influence monetary policy, which has traditionally been provided some insulation from political pressure.

Lawrence H. Summers, Former US Treasury Secretary, shares his thoughts on whether or not Federal Reserve independence is dying and states that this is the gravest most extensive politicization of the Fed in more than 50 years. He also talks about the Trump Administration disregarding the norms set when addressing the Fed and how this adds risk to America’s economy. Lawrence H. Summers speaks with Joe Mathieu on the late edition of Bloomberg’s “Balance of Power.”

Cook said in a statement that Trump did not have any authority to fire her and that she would not resign. Abbe Lowell, her lawyer, said Cook intends to file a lawsuit challenging her firing.

“I will continue to carry out my duties to help the American economy as I have been doing since 2022,” Cook said.

Trump’s effort to fire Cook — the first Black woman to serve on the Board of Governors in Washington — dramatically escalates his effort to exert more control over the US central bank and sets up a legal challenge that could have major impacts on monetary policy.

If Trump succeeds in removing and replacing Cook, it provides the president, who has aggressively advocated for interest rate cuts and expressed frustration with Fed Chair Jerome Powell over his approach, a four-person majority on the Fed’s seven-member board.

A president has never before removed a Fed governor from office. Democratic lawmakers immediately denounced Trump’s effort.

“The illegal attempt to fire Lisa Cook is the latest example of a desperate president searching for a scapegoat to cover for his own failure to lower costs for Americans,” Elizabeth Warren, the top Democrat on the Senate Banking Committee, said in a statement. “It’s an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court.”

Trump was convicted in 2024 on multiple counts of falsifying business records and is the first convicted felon to serve as president.

In challenging the removal order, Cook could also immediately seek an injunction reinstating her while litigation moves forward.

The Trump administration does not currently plan to do additional vetting and interviews to fill Cook’s slot on the board, as they did when Governor Adriana Kugler stepped down earlier this month, according to a person familiar with the matter. The plan is to keep moving with the selection process for Powell’s replacement, and then decide whether any remaining candidates for that role would be a good fit for any other vacancies, the person said.

Cook is the latest official to be targeted over mortgage questions by Federal Housing Finance Agency Director Bill Pulte, a Trump political ally, who has also asked the Justice Department to investigate loan applications by Senator Adam Schiff of California and New York Attorney General Letitia James, who brought a civil fraud lawsuit against the Trump Organization.

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