Here’s what it really means for Trump to get control of the Federal Reserve board
US President Donald Trump talks about Ukrainian President Volodymyr Zelenskyy and European leaders in the East Room of the White House on August 18, 2025, on August 18, 2025.
Andrew Caballero-Reynolds | AFP | Getty Images
President Donald Trump’s attempt to expel the federal reserve governor Lisa Cook is more than expelling one: if it succeeds, a maneuver that will indicate a seismic change that has been accepted on politics for an institution for ages.
Since he took office in January, Trump has placed the Fed in plus signs of the direct execution power. He brought the central bankers with it because he did not reduce the rates, threatened to remove the chair Jerome Powell, and now he has actually taken an unprecedented step in trying to destroy Cook.
From the president’s point of view, he wants to reform the non -popular institution that is responsible for the illegal inflation that hit the US after the Covid Pandememi. Trump sees lower interest rates as a way to manage the swelling federal debt, while increasing a weight market against a growing economy.
However, in addition to legal scholars, financial market experts and current and former nutritional officials say that Trump’s moves are not only threatened to make the Fed more political, but also weaken the basic columns of the American financial system.
“We are on a road that will lead to erosion of the independence of the Central Bank,” Professor Kathryn Judge at Columbia Law Faculty. He said. “The Fed’s loss of reliability that the Fed has tried to build for decades would have been incredibly costly for the long -term health of the economy.”
In the Fed’s case, independence is a term used to define its freedom from foreign policy to determine the best monetary policy for the US economy. This, especially if these decisions are not popular, such as the federal open market committee increases interest rates to reduce inflation.
However, it is more dangerous than the level of three ratios controlled by the FED.
What does the Board check and what does it do
If Trump receives the majority of the members of the Board of Governors to vote as he wishes – and the evidence is to make sure that he can achieve such a goal – it will access the economy and the key arms that control the country’s financial infrastructure.
For example, the seven -member board of directors has regulatory and execution power on banks.
Moreover, the 12 -member FOMC determines the fund interest rate overnight, while the governors alone determine the discount rate, are used to find the current value of the existing money, and they serve as a kind of railing for the fund ratio that pays for the banks to store their money in the FED.
Finally, the Board has control over the re -appointment of the 12 Regional Bank President and a series of names come in 2026.
It is the role of the Fed in maintaining the integrity of the treasury system and protecting a stable dollar.
In other words, this is more than just a ratio deduction in September.
“I think, the most serious danger for people to rely on the FED board of directors is what Trump himself is doing. He said. “Because if Trump succeeds with this, the FED board argues that the board of directors is nothing but a rubber stamp.
“In the future, when the dictatorship of the dictators of the banana republics in Latin America has determined the monetary policy or Türkiye has experienced in recent years, we may have the same type of hyperinflation because the dictator determines the monetary policy.”
What does Trump want to achieve
According to the administration, Trump’s lieutenants say that they largely believe in the independence of the FED, but they see the Central Bank as an institution that must rule.
However, the president admitted that he would perform Turnusol test Candidates for the gaps of the Board of Directors, candidates that they are willing to low rates, and in the past, the Fed’s rate decisions, the Central Bank’s field of intervention in the field of other measures to have a say.
“I don’t think this is the weakening of fed independence. I think the system needs a wholesale re -evaluation and President Trump is doing things unusual,” Joseph Lavorgnna, a senior economist and currently a senior Economist and Currently Secretary of Treasury Scott Bessent. He said. “Fed’s climate change and diversity and involvement issues, and certainly beyond the tasks of the on behalf of the things that go beyond the task.”
In fact, the idea that the Fed needs a revision has support in Wall Street.
Former PIMCO ruler and now Allianz Chief Economy Advisor Mohamed al-Eierian argued that Powell has recently stepped into a chair to avoid a war on independence. Moreover, he said the FED helps to accelerate the current war of policy errors.
“This is the world I’m worried about.” He said. “The Fed is vulnerable on many different fronts, and now I’m scared, I’m afraid we’re really scared.”
Among the reforms mentioned by El-Erian, he left after the Bank of England, bringing a difference perspective to the “foreign members” policy-making group “and helping to reduce the risk of group thinking.”
He also said that Fed should rethink the 2% inflation target, and said that Powell was not at the table over and over again.
Last game
But critics say what Trump is talking about is just beyond structural reforms.
“This is a really 90 -year -old Fed independence story about trying to get the one with the 90 -year -old Fed independence.” He said. “The whole aim was to give the Fed independence to do this very important thing that determines the monetary policy. And now, for the first time we see a direct effort to weaken it.”
It is another issue how successful Trump will be.
He still has two appointments on the board, Christopher Waller and Michelle Bowman. Stephen Miran Adriana Kugler’s resignation is waiting for the Senate approval to fill the seat. When Powell was exhausted as a chair, he should leave next May, create another gap and give the president five seats.
However, it is risky to rely on all these members automatically.
Cornell Professor Hockett showed strong independent lines, both Waller and Bowman, and non -concentrated hawk and “small apparatics for Trump” depending on the conditions.
“Assuming that they are willing to operate as Partizan Hacks, unfair to the governors.”
It is also a series of court tests that will potentially focus on whether Trump’s cook or someone else “causes” cause “.
Krishna Guha, President of the Global Policy and Central Bank Strategy in Evercore Heat, said that if the President is successful, he may have extensive effects on economics and markets.
“At this point, we think that the fundamental situation should be a very important tribune until 2026, and – although it does not automatically correspond to a major challenge in politics and practice – this should be very seriously possible to lead to a significant real reaction function with past practices and a significant reaction function for markets.” He said.
Bets are also high for the future of the Fed as an institution.
“As Trump does, there was no threat that caused independence in our history as a republic, as Trump does.” He said. “I think our Central Bank and therefore long -term confidence in our currency will take another hit.”
