Trump’s “Fed Overhaul Plan”: Replace, Control, Force Rate Cuts

TradingKey - Federal Reserve Governor Lisa Cook is now under mounting political and legal pressure. On August 21, the U.S. Department of Justice sent a letter to Fed Chair Jerome Powell demanding that Cook be immediately removed from the Board, citing allegations of fraudulent loan applications and potential mortgage fraud.

President Trump has also taken to social media to demand Cook’s resignation, claiming she has lost the qualifications to serve. Market analysts believe the real objective behind this storm is not just about one official — it’s part of a broader effort by Trump to reshape the Federal Reserve Board, secure a majority, and thereby strengthen White House influence over monetary policy.

If Cook steps down, Trump would gain a fourth nomination opportunity on the seven-member Board — giving his appointees a majority. Adriana Kugler, a Biden appointee, has already left office early. Trump previously appointed Christopher Waller and Michelle Bowman, and has just nominated his former economic advisor Stephen Miran to fill Kugler’s seat. This means Trump is actively reshaping the Board’s composition — and with it, gaining greater influence over interest rate decisions and banking regulations.

The move is widely seen as a new phase in Trump’s campaign to assert control over the Fed, signaling a further erosion of the central bank’s independence.

However, this strategy may not unfold as smoothly as expected.

First, Powell has no authority to unilaterally remove Cook. Federal Reserve governors are nominated by the President and confirmed by the Senate, and can only be removed for “just cause.” Even if Trump’s appointees hold a majority on the Board, monetary policy is set by the Federal Open Market Committee (FOMC) — a 12-member body that includes regional Fed presidents. The New York Fed holds a permanent vote, while others rotate. To force a major rate cut, the Trump-aligned faction would need to secure broader support beyond the Board.

As former Fed officials have warned, even appointees with political ties may not follow White House orders. The clearest counterexample is Powell himself — originally nominated by Trump during his first term, yet now at odds with him over monetary policy. Trump has repeatedly attacked Powell on social media, accusing him of being “too slow to raise, too slow to cut.”

It’s worth noting that Cook has stated she will not resign under political pressure and intends to defend herself with facts. As the first Black woman to serve on the Fed Board, she was appointed by Biden and holds a term that runs until 2038. If she resists, any legal or administrative effort to remove her could devolve into a protracted battle.

Meanwhile, the status of Powell himself remains a key uncertainty. His term as Chair ends in May 2026, but he could remain on the Board as a governor until 2028 — assuming he chooses to do so.

This controversy casts a shadow over the upcoming Jackson Hole central banking symposium, set to begin in one hour. Trump has repeatedly criticized Powell for “raising too slowly and cutting too late” and has attacked the Fed’s headquarters renovation for cost overruns.

Now, the push to remove Cook is no longer just a personal dispute — it’s a broader power struggle over the independence of monetary policy and the limits of political interference.