Why does Trump insist on pushing for the removal of Cook? Seeking to control the majority of seats on the Federal Reserve Board!

Former President Trump is pushing for the removal of Federal Reserve Governor Lisa Cook. Media analysis suggests that if the removal is successful, he will have the opportunity to further expand the White House's influence over the Federal Reserve by controlling a majority of the seven-member board.

Media reports indicate that Trump has made it clear that he wants the Federal Reserve to significantly lower interest rates, while the Federal Reserve, under Chairman Jerome Powell's leadership, has faced ongoing attacks from the White House this year, whether regarding monetary policy decisions or cost overruns on a major renovation project.

On Wednesday, Trump called for Cook's resignation after Federal Housing Finance Agency (FHFA) Director Bill Pulte accused Cook of lying on loan applications to obtain better terms, alleging mortgage fraud. Cook's term will last until 2038, and she subsequently responded that she would not resign under coercion.

Claudia Sahm, Chief Economist at New Century Advisors and former Federal Reserve economist, stated,

"This is a new tactic by this administration to try to control the Federal Reserve; they are using every means available to achieve this control."

Analysis indicates that the hardline approach against Cook highlights how far the Trump administration is willing to go to expand its influence over the White House. Historically, the Federal Reserve has been insulated from political pressure in its interest rate decisions. The White House has previously employed similar tactics against political adversaries such as California Senator Adam Schiff and New York Attorney General Letitia James.

Media reports suggest that this also casts a shadow over the Federal Reserve's upcoming annual meeting in Jackson Hole, Wyoming, scheduled for Thursday evening. Powell is set to deliver his final keynote address to global central bank governors attending the meeting on Friday morning, and he is unlikely to make a clear commitment to lower interest rates as Trump desires.

Trump's "allies" gaining a majority on the board does not guarantee the implementation of White House intentions

Federal Reserve officials have largely ignored Trump's calls to lower interest rates this year, citing inflation risks potentially stemming from his tariffs.

Analysis suggests that if Cook were to leave, it would allow Trump to appoint four Federal Reserve governors, giving him a majority on the seven-member board. Trump has already appointed two of the current governors during his first term and recently nominated his economic advisor Stephen Miran to fill the third seat vacated by Biden appointee Adriana Kugler.

This strategy aligns with Trump's approach in other federal agency boards, attempting to fill boards with Republican nominees.

However, media believe that even if Trump secures a majority on the board, it does not mean he will achieve his desired outcomes in interest rate decisions.

Trump's nominees will still need to seek support within the broader Federal Open Market Committee (FOMC), which is responsible for making interest rate decisions; moreover, there is no guarantee that these new board members will simply execute the president's intentions. Another key issue is who Trump will nominate to replace Powell when his term as chairman expires in May next year. Whether Trump will have the opportunity to appoint a fifth governor depends on whether Powell decides to continue serving his term, which will end in 2028.

William B. English, a former senior economist at the Federal Reserve and current professor at Yale University, said.

"Even if there is another governor nomination, it cannot guarantee that the new chairman will gain support in the FOMC to push for a more accommodative monetary policy."

Interest rate decisions are made by the FOMC, which is composed of 12 policymakers from Washington and across the country who have voting rights on interest rate decisions. This means that even if the four Trump nominees support a policy motion, they still need to secure the support of at least three other voting members to form a majority.

All seven governors have permanent voting rights, as does the president of the New York Fed. The remaining four voting seats rotate annually among the presidents of the other 11 regional reserve banks.

Gaining a majority on the board could give the White House greater influence in other policy areas, including bank regulatory matters, which fall under the board's jurisdiction and are not part of the FOMC. The board is also responsible for approving or rejecting the reappointment requests of regional reserve bank presidents, who serve five-year terms.

"Insiders" may not be reliable

There are also analyses suggesting that it remains uncertain whether Michelle Bowman and Christopher Waller, nominated by Trump during his first term, will be willing to align with the White House's wishes.

Bowman and Waller voted against the decision to maintain the benchmark interest rate at the July FOMC meeting, arguing that a 25 basis point rate cut was necessary due to signs of deterioration in the labor market that required a policy response.

However, as one of the popular candidates to succeed Powell as chairman of the Federal Reserve, Waller has recently emphasized the importance of central bank independence, warning that if leaders lack investor trust, inflation expectations and market interest rates may rise.

Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, stated.

"Perhaps Trump's idea is that he can get four completely loyal governors, but we cannot confirm whether the current governors will truly be loyal."

"The new governors will likely be so, as that is how they are chosen. But the current Bowman and Waller have already provided economic reasons for their support of accommodative policies."

If Cook leaves, it may prompt Powell to stay on as governor

Powell has not publicly stated what his plans will be after his term expires in May next year. Traditionally, former Federal Reserve chairs leave leadership after stepping down, even though their governor terms can continue.

However, some analyses suggest that if Cook were to leave early, it could pressure the 72-year-old Powell to continue serving as a governor to some extent to resist political interference. Andrew Brenner, the head of international fixed income at NatAlliance Securities, wrote in a report on Wednesday,

"This is why we believe Powell will grit his teeth and stay on the Federal Reserve Board until his term expires in January 2028."