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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. President Donald Trump shared

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Speaker 1: a letter on social media Monday night, addressed to Federal

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Speaker 1: Reserve Board Governor Lisa Cook social.

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Speaker 2: Media, accusing her of falsifying records to obtain favorable terms

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Speaker 2: on a mortgage. The president writing, I am determined there

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Speaker 2: is sufficient cause to remove you from your position.

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Speaker 1: It wasn't exactly a surprise. Trump has been telegraphing that

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Speaker 1: he wanted to remove Cook for days of her allegations

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Speaker 1: that she committed mortgage fraud in twenty twenty one, but

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Speaker 1: his attempt to push out a sitting FED governor still

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Speaker 1: marks a watershed moment. In a cabinet meeting Tuesday, Trump

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Speaker 1: doubled down on his allegations. No, she seems to have

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Speaker 1: had an infraction, and she can't have an infraction, and

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Speaker 1: especially that infraction because she's in charge of, if you

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Speaker 1: think about it, mortgages, and we need people that are

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Speaker 1: one hundred percent above board. It's unclear whether Trump actually

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Speaker 1: has the power to remove Cook. Cook has said she

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Speaker 1: will answer legitimate questions but will not be quote bullied

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Speaker 1: into stepping down. Her lawyer has said they'll challenge the

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Speaker 1: firing in court and The Federal Reserve said in a

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Speaker 1: statement this afternoon that they will abide by any court decision.

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Speaker 3: Trump says she's fired, She says she's not. What happens

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Speaker 3: if she shows up to work.

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Speaker 1: Michael McKee is an international economics and policy correspondent for Bloomberg.

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Speaker 3: Does the Fed letter in, does the President send in

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Speaker 3: the US marshals to drag her out? Nobody knows exactly

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Speaker 3: how this is going to play out.

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Speaker 1: The Trump administration has been putting pressure on the Federal

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Speaker 1: Reserve to lower interest rates for months. If Cook is removed,

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Speaker 1: Trump could have an opportunity to appoint another FED governor

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Speaker 1: who's more likely to go through with more aggressive rate cuts.

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Speaker 1: One of the biggest open questions is whether firing Cook

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Speaker 1: would even be legal. But the other, Michael says, is

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Speaker 1: what it all means for the independence of the Fed.

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Speaker 3: The Fed in always a lot of credibility, and if

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Speaker 3: this move were to succeed, then it would tell people

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Speaker 3: that the President is dictating monetary policy rather than the Fed,

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Speaker 3: and that would create a real problem for the Fed

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Speaker 3: with the markets and public credibility.

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Speaker 1: I'm Sarah Holder, and this is the big take from

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Speaker 1: Bloomberg News. Today on the show, President Trump moves to

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Speaker 1: fire Federal Reserve Board Governor Lisa Cook, What it means

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Speaker 1: for the FED and the economy if Trump prevails, and

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Speaker 1: where the case could go from here. Trump started calling

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Speaker 1: for Federal Reserve Board Governor Lisa Cook's removal last week

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Speaker 1: after the Federal Housing Finance Agency Director Bill Poulti started

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Speaker 1: raising questions about Cook's mortgage applications.

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Speaker 3: The allegations are that in twenty twenty one, she signed

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Speaker 3: a mortgage document in ann Arbor, Michigan, then said at

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Speaker 3: the time she would make that her permanent residence. Then

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Speaker 3: to sign another mortgage in Georgia, saying she would make

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Speaker 3: that her permanent residence. And according to the FA director

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Speaker 3: of Bill Poulti, that's mortgage fraud. He said that he

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Speaker 3: had been combing records of people to see who committed

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Speaker 3: mortgage fraud, and he's found three so far, Adam Schiff,

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Speaker 3: the Democratic senator from California, and Letitia James, the Attorney

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Speaker 3: General of New York, and now Lisa Cook.

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Speaker 1: Have there been any charges in the Lisa Cook case

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Speaker 1: or any evidence presented.

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Speaker 3: There hasn't been any charges or evidence presented publicly. The

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Speaker 3: FHFA forwarded documents to the Justice Department and asked them

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Speaker 3: to investigate, and the Justice Department said last week that

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Speaker 3: it would begin an investigation, but they have not been

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Speaker 3: presented publicly and so there is no public evidence that

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Speaker 3: she did anything wrong yet.

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Speaker 1: And I mean, if these allegations proved to be true,

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Speaker 1: is what Lisa Cook is a key used of a

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Speaker 1: fireable offense.

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Speaker 3: Well, that's an open question because under the law, the

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Speaker 3: Federal Reserve Act says the President can remove a FED

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Speaker 3: governor for cause, but cause is generally considered inefficiency, neglective duty,

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Speaker 3: or malfeasance in office. And these took place before she

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Speaker 3: was nominated to the FED, So we don't know if

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Speaker 3: it reaches the bar of for cause and gives the

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Speaker 3: President the right to fire her. That's something that the

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Speaker 3: courts will have to adjudicate. But it does reflect badly

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Speaker 3: on the FED. And so it may be that if

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Speaker 3: she were guilty of something, they would essentially pressure her

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Speaker 3: to leave, but we don't know yet. That's a long

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Speaker 3: way down the road.

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Speaker 1: Cook's lawyer says they'll challenge the firing in court. What

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Speaker 1: has Cook said about all this?

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Speaker 3: Cook has said very little when the charges were first

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Speaker 3: made by the President, she said that she would not

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Speaker 3: be bullied into resigning, and then in response to the

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Speaker 3: letter from the White House last night, her attorney put

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Speaker 3: out a statement from her saying that his demands lack

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Speaker 3: any proper process basis or legal authority, and will take

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Speaker 3: whatever actions are needed to prevent this attempted illegal action.

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Speaker 1: I want to step back for a second and just

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Speaker 1: learn a little bit more about Lisa Cook. Who is

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Speaker 1: she and what has defined her career well.

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Speaker 3: She is an academic who has spent a lot of

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Speaker 3: time working on labor market issues, economic growth, financial systems,

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Speaker 3: and innovation policy. Also, she's focused on race related economic issues.

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Speaker 3: She's the first black woman ever appointed to the FED Board.

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Speaker 3: She was a regular fixture at Jackson Hole and places

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Speaker 3: like that and was nominated in twenty twenty two by

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Speaker 3: President Biden to the seat. Renominated in twenty twenty four,

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Speaker 3: and she came from Michigan State University to the FED

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Speaker 3: and has been there now for two little over two

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Speaker 3: years with a term that doesn't expire twenty thirty eight.

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Speaker 1: Given the Trump administration stance on race and equity related issues,

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Speaker 1: has Lisa Cook's research background and her race, being a

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Speaker 1: black woman made her more of a target for this administration.

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Speaker 3: There are going to be people that say that given

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Speaker 3: the administration's actions in the past. We don't know for

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Speaker 3: sure what exactly motivates Trump in this case, but it's

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Speaker 3: more likely that she was a target of opportunity. The

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Speaker 3: FHFA found this discrepancy in her mortgage documents, and the

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Speaker 3: president wants to get rid of people who are on

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Speaker 3: the FED so he could put his own people in

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Speaker 3: there and maybe push them to drive down interest rates

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Speaker 3: much farther. And so she just happened to fall in

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Speaker 3: his lap as somebody he could try to fire.

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Speaker 1: Does Trump actually have the power to remove Cook? What

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Speaker 1: does the law say about it, What does the Supreme

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Speaker 1: Court say about it? What does the FED say about it?

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Speaker 3: Well, the law says that you can fire a governor

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Speaker 3: only for the question is what is cause, And we

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Speaker 3: have some previous precedents that say it's basically conduct in

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Speaker 3: office that is detrimental to the performance of your duties,

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Speaker 3: and so that would have to be proven in court.

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Speaker 3: There would probably have to be a court judgment that

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Speaker 3: she had broken the law, even if it didn't matter

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Speaker 3: that she wasn't in office at the time, so it's

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Speaker 3: not clear that president can actually fire her. The Supreme

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Speaker 3: Court said in a case in May involving a couple

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Speaker 3: of other administration officials who were fired by the President,

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Speaker 3: that the FED has this special carve out that they

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Speaker 3: aren't necessarily able to be fired at will, that the

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Speaker 3: President has to respect the four cause issue, so that

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Speaker 3: gives them a little bit of extra protection.

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Speaker 1: After the break, what the FED has said about President

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Speaker 1: Trump's efforts to fire Lisa Cook and what the President's

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Speaker 1: threat means for the Central Bank as an institution. Federal

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Speaker 1: Reserve Governor Lisa Cook is ready to go to court

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Speaker 1: to challenge Trump's efforts to remove her, but there are

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Speaker 1: also other players who could step in to defend her,

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Speaker 1: like Federal Reserve Chair Jerome Powell and the FED itself.

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Speaker 1: Bloomberg's Michael McKee told me, so far, they've been staying

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Speaker 1: out of it.

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Speaker 3: The FED has not commented on this. The problem for

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Speaker 3: the Fed is that they don't have the information either.

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Speaker 3: They haven't got the mortgage documents. They don't know what

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Speaker 3: the issues are. They don't know if she broke the law.

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Speaker 3: They don't want to throw her overboard, but they also

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Speaker 3: don't want to endorse illegal conduct if that were the case,

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Speaker 3: so they're going to stay out of it as much

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Speaker 3: as possible.

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Speaker 1: I feel like we say this so much reporting on

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Speaker 1: the Trump administration, but has anything like this happened before?

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Speaker 3: Nothing like this has ever happened before. In the one

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Speaker 3: hundred and twelve year history of the FED, no governor

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Speaker 3: has been fired by a president. Closest situation we have

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Speaker 3: was Vice Chair Richard Clarita when he was coming to

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Speaker 3: the end of his term. There was during COVID an

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Speaker 3: issue with him. What he said he did was rebalance

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Speaker 3: his stock portfolio, but others said he was trying to

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Speaker 3: profit from inside information, and what he ended up doing

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Speaker 3: was resigning from the FED a couple of months early.

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Speaker 3: But that's the closest parallel you have.

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Speaker 1: It all at a high level. What does Trump want

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Speaker 1: out of this? Why fire Lisa Cook?

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Speaker 3: Well, at bottom, he's looking for lower interest rates. He

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Speaker 3: has said that interest rates should be three hundred bases

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Speaker 3: points lower, somewhere around one percent. The FED thinks that's

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Speaker 3: a ridiculous idea that they might lower interest rates, but

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Speaker 3: maybe twenty five to fifty basis points. This year and

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Speaker 3: that's all. So he's got a bone to pick with

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Speaker 3: the Fed because the higher interest rates make his budget

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Speaker 3: cost a lot more. The deficit will rise because we

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Speaker 3: have to pay more in interest payments. Also, Trump wants

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Speaker 3: to control everything that he can, and by getting rid

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Speaker 3: of Lisa Cook, if he puts a fourth person on

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Speaker 3: the board, two in the first term and two in

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Speaker 3: this term, then he would have a majority of the

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Speaker 3: seven member board. And the tinfoil conspiracy hat theory is

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Speaker 3: that FED Bank presidents there are twelve of them, and

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Speaker 3: if Trump had managed to take control of the board,

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Speaker 3: and if everyone went along that he appointed, he could

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Speaker 3: have all those people fired too and try to influence

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Speaker 3: the selection of new FED Bank presidents. The administration doesn't

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Speaker 3: select them, they're selected by local boards, and Trump would

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Speaker 3: probably put pressure on those local boards to appoint people

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Speaker 3: who were sympathetic to his views.

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Speaker 1: Right, Well, it's interesting, it could be a tinfoil hat theory.

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Speaker 1: But former Federal Reserve Vice chair Lil Brainerd was on

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Speaker 1: Bloomberg TV earlier today and she raised those concerns that

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Speaker 1: multiple FED District Bank presidents could be removed from office

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Speaker 1: by Trump's FED Board picks. Next year.

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Speaker 2: Any member of the board, presumably is going to worry

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Speaker 2: that they two could be subject to this kind of

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Speaker 2: political pressure, and that fundamentally undermines the institutional independence of

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Speaker 2: the FED, which means higher inflation potentially less.

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Speaker 1: Can you walk us through what this move could mean

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Speaker 1: for the rest of the Central Bank as an institution

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Speaker 1: and what did you make of those concerns that she raised.

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Speaker 1: Does it add credence to this theory?

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Speaker 3: It would add credence to it. I think the thing

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Speaker 3: that most people are looking at is all of these

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Speaker 3: theories and the idea of firing Federal Reserve governors were

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Speaker 3: considered fringe ideas, and now they're happening, So you can

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Speaker 3: never discount anything with Donald Trump. The problem for the

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Speaker 3: FED there are nineteen members on the Open Market Committee,

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Speaker 3: which sets interest rates. Twelve of them voted at a time,

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Speaker 3: all seven governors and five rotating regional Fed Bank presidents.

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Speaker 3: So if you changed the rotating Fed Bank presidents, you

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Speaker 3: could get enough out of the twelve to get a

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Speaker 3: majority and push interest rates down.

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Speaker 1: This is bringing us to sort of the central question

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Speaker 1: behind all of this, which is the independence of the FED.

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Speaker 1: Can you explain to us again why is having an

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Speaker 1: independent FED so important? And what happens to the US

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Speaker 1: economy and to the public if that independence is challenged.

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Speaker 3: Independence is grounded in the idea that if you are

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Speaker 3: not subject to political pressure, you're making decisions on interest

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Speaker 3: rates in the best interests of the economy. What is

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Speaker 3: the economy telling you you need to do. Do you

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Speaker 3: need to raise rates because inflation is rising? Do you

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Speaker 3: need to cut rates because the economy is tanking? You

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Speaker 3: react to what is important. In this case, it would

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Speaker 3: be the president wants lower interest rates for his own

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Speaker 3: reasons and not for the good of the economy, and

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Speaker 3: so that would have a tremendous impact on the way

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Speaker 3: people felt about the FED, and it would probably lead

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Speaker 3: to higher inflation, and the FED if it couldn't live

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Speaker 3: up to its promise to bring down inla, then what

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Speaker 3: happens is inflation expectations become unmored. You start to think, well,

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Speaker 3: things are going to cost more tomorrow and the Fed's

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Speaker 3: not going to stop that, So maybe I'm not going

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Speaker 3: to buy or maybe I'm going to try to buy

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Speaker 3: everything today, and the economy starts to really contract under

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Speaker 3: those circumstances.

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Speaker 1: This is the big take from Bloomberg News. I'm Sarah Holder.

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