President Trump’s move to fire Lisa Cook could be the final Shard of the puzzle he needs to control the Fed. If successful, he could restructure the FOMC and approve rate cuts without replacing Powell.
Seven governors control the Federal Reserve and the regional bank governors, and Trump has appointed three of them. If a new majority breaks precedent, they will have enormous power to set fiscal policy.
Trump's new move with the Fed
President Trump has repeatedly argued with Fed Chairman Jerome Powell , threatening to fire him for cutting interest rates . The Fed hasstood firm , as the Supreme Court has ruled that the president cannot fire its chairman.
Last night, however, Trump had a new strategy, moving to fire one of the Governors , Lisa Cook.
This move is particularly interesting for a couple of reasons. First, Cookhas steadfastly refused to resign, claiming that Trump has no such power over the Fed. She even plans to sue. Plus, Powell offered Trump an olive branch last week.
So why is this tension happening now? Some TradFi analysts are warning, arguing that this could signal the end of the Fed’s independence:
Essentially, Trump may be working on a plan to control the Fed without actually firing Powell. Cook is one of seven Fed governors who are appointed by the president but run the Fed independently.
Collectively, they approve the Fed's Regional Bank Presidents and have the power to remove them at any time.
Restructuring at the FOMC?
Together, the Governors and the Regional Presidents make up the FOMC. In other words, the Governors could be Trump’s mechanism for radically restructuring the Fed. If Trump succeeds in removing and replacing Cook, he will be able to make any changes he desires.
Specifically, he appointed two of the seven governors in his first term, nominated a third this year , and Cook's replacement will be the fourth. Jim Bianco, a financial analyst, details how this could give Trump new power:
“All regional bank presidents are ‘at will’ employees of the Federal Reserve Board of Governors, meaning the board can vote to remove them for any reason, or no reason, whenever it wants. The Fed Board of Governors has never voted ‘no’ on a regional bank president of the Federal Reserve, let alone removed one. However, two governors have abstained,” Bianco said.
In the Fed's 112-year history, the only abstention was when two Trump appointees refused to vote for Austan Goolsbee, a Democrat, in 2023.
In other words, this power to fire Regional Bank Presidents has never been used, but it is still very real. Tradition and precedent are the only things that keep it in check, and they have been broken.
If Trump replaces Cook, these governors could quickly replace Democrats on the FOMC. If the Supreme Court agrees to fire Cook, there would be no other mechanism to legally challenge the process.
At that point, Trump could order the Fed to cut interest rates, whether Powell likes it or not.
How Cryptocurrencies Could React to Drama From the Fed
So what does this mean for crypto? First of all, these plans will take months to come to fruition, no matter what happens. Rate cuts are good for crypto , and the Fed can adjust economic policy to suit the needs of the industry.
In other words, this plan could create unprecedented opportunities for crypto investments.
However, this depends on the system remaining intact . Rate cuts also signal economic uncertainty , and there are many negative signs in the US market right now.
If Trump orders the Fed to prioritize the crypto industry in the short term, it could run out of tools to fight a real recession.
In other words, the crypto industry shouldn’t get too excited about Trump taking control of the Fed, which could cause a lot of problems, even from a US-only perspective, let alone XEM international investments or the bond market.
A partisan Fed would break the basic rules of US fiscal policy, and anything could happen after that.
