OPINION:
For months, speculation has swirled around President Trump and the Federal Reserve, particularly whether he might try to remove Chairman Jerome Powell before Mr. Powell’s term ends next year or whether he has the authority to do so.
Most have now assumed that Mr. Trump will hold his fire and wait to appoint a new chair when the time comes. Still, the debate has underscored Mr. Trump’s frustration with the Fed and raised the question of how far a president might go to reshape it.
That question took a sharp turn recently with allegations of mortgage fraud against Lisa Cook, a Biden appointee to the Fed. History may remember this moment less for the accusations against Ms. Cook than for what Mr. Trump has chosen to do in response. For the first time in U.S. history, a sitting president has attempted to fire a Federal Reserve governor. The implications stretch far beyond one person. This decision threatens to redefine the Fed’s independence and America’s credibility in global financial markets.
I am not here to litigate Ms. Cook’s guilt or innocence or defend the Fed’s recent track record. I’ve been a critic of its stimulus addiction and its disastrous handling of inflation. Change is overdue. Still, this moment is about setting a precedent, and conservatives should tread carefully.
The Federal Reserve was built to stand apart from politics, with 14-year terms meant to shield monetary policy from electoral whims. That independence is the backbone of U.S. market credibility. By attempting to remove a governor, the president crossed a line no predecessor dared. The door is now cracked for future administrations to purge dissenters and pack the Fed with loyalists. That isn’t stability; it’s politicization.
Don’t get me wrong: I have supported this administration and continue to back most of Mr. Trump’s economic policies. His tax reforms, deregulation and renewed focus on competitiveness have strengthened our economy. Still, I am not a blind follower. In this case, I don’t like it, not because of optics or even the short-term benefit of a more aligned Fed but because of what comes next. A future administration, far less committed to free markets, could weaponize the Justice Department to manufacture “cause,” sweep out governors and stack the Fed with ideologues.
Imagine monetary policy dictated by liberals under the banner of “climate finance” or “equity lending.” That’s a future conservatives cannot afford to enable.
I’m also not suggesting that Ms. Cook didn’t do wrong or that her actions, if proved, wouldn’t justify removal, but that there should be due process first and the opportunity for the Fed itself to act before the president intervenes.
In the short term, this move has political and even some economic appeal by raising the prospect of a Fed more closely aligned with the president’s pro-growth agenda. The Fed is unpopular. Inflation lingers, and rate cuts could bolster growth, lower lending costs and help the U.S. refinance trillions of dollars in short-term debt taken on under the Biden administration. To Mr. Trump’s base, this looks like decisive leadership.
Markets don’t care about applause lines. They care about credibility. Undermine the Fed’s independence, and investors could demand higher returns to offset the risk. That means higher borrowing costs for the government, higher mortgage rates for families and higher financing costs for businesses. In the end, every corner of the economy could feel the pain.
Conservatives believe in guardrails: checks and balances, limits on concentrated power and institutions designed to withstand executive overreach. If we cheer this precedent today because it comes from “our side,” we will have no standing to object when it is used against us tomorrow.
The Federal Reserve deserves scrutiny, and I remain critical of its failures. However, removing a sitting governor for cause, without due process, feels more political than prudent, and this president should understand this better than anyone else.
Although I continue to be an ardent supporter of Mr. Trump, I can’t go along for the ride on this one. The long-term cost far outweighs the immediate benefit. The politicization of the Fed would carry consequences that are too damaging to ignore. In this case, conservatives should call it what it is: a precedent that risks doing lasting harm to the very principles we stand for.
• Seth Denson is a business and market analyst and author of “The Cure: A Blueprint for Solving America’s Healthcare Crisis.”
Please read our comment policy before commenting.