Trump Removes Fed Governor Lisa Cook Will Affect National Financial Stability

JAKARTA - HFX International Futures President Commissioner Sutopo Widodo stated Donald Trump's decision to fire Federal Reserve (The Fed) Governor Lisa Cook on charges of mortgage loans has the potential to cause significant turmoil.

"This action directly erodes the independence of the Fed, a fundamental pillar in maintaining global financial stability," he told VOI, Tuesday, August 26.

According to him, by replacing a governor who has a long term, Trump can be considered trying to enforce monetary policy under his political control, especially to maintain low interest rates.

He conveyed that this could trigger the market and increase investor confidence, both at home and abroad.

"The main concern is that a politically biased monetary policy could threaten the credibility of the US dollar, which risks triggering volatility in the global market and having a negative impact on asset prices," he said.

Earlier, US President Donald Trump on Monday, August 25 ordered the dismissal of Federal Reserve Governor (the Fed) Lisa Cook. This is due to alleged irregularities regarding the mortgage agreement made by the Fed boss.

This dismissal is also a worrying step regarding the President's power in the movement of independent institutions such as the Fed. Especially, in the dismissal of Federal Reserve officials.

According to his letter to Cook, Trump admits that he has sufficient reason to dismiss him from the position of Governor of the Fed. Because, in 2021, Cook showed in documents for separate mortgage loans on property in Michigan and Georgia that both are the main residences he wants to live in.

Cook, who was appointed to the Fed board in 2022 by former US President Joe Biden, has not provided a detailed explanation of the transaction since a question about the transaction was filed last week by US Federal Housing Finance Agency director William Pulte, who referred the matter to Attorney General Pamela Bondi for investigation.

As is known, the Federal Reserve Law does allow the dismissal of a governor who is in office for "a reason".

This has never been tested by previous presidents, especially since the 1970s, most have taken a hands-off approach to Fed affairs as a way to ensure trust in US monetary policy.

Trump in the letter accused Cook of "fraud and criminal behavior in financial matters" and said he was unsure of Cook's "integrencies".

"At least, the behavior in question shows the type of negligence in financial transactions that question your competence and credibility as a financial regulator," he said.

Trump claims the authority to fire Cook under Article 2 of the US Constitution and the 1913 Federal Reserve Act.