Biden-appointed Fed director pressured by Trump to resign

"Allegations of mortgage fraud"

If resigned, 4 out of 7 Fed directors

Filled with pro-Trump figures

Donald Trump, the President, on the 20th (local time), demanded the immediate resignation of Lisa Cook, a director at the Fed appointed during the Joe Biden administration. This move seeks to oust another Democratic figure, following Adriana Kugler, who stepped down on the 8th. It is interpreted as an attempt to replace Federal Open Market Committee (FOMC) members and pressure for a rate cut.

The official reason is suspicion that Cook committed fraud during her mortgage process. In 2021, Cook submitted documents stating the properties purchased in the State of Michigan and the State of Georgia were for primary residence; however, it is alleged she rented out the Georgia property the following year. The Federal Housing Finance Agency (FHFA) requested an investigation from the Department of Justice.

The loan amount for the Georgia property was reportedly a 30-year term for about $540,000 (around ₩750 million). For primary residence, loan amounts and interest rates are generally more generous compared to investment or rental purposes.

Cook previously served as a member of the Council of Economic Advisers (CEA) under former President Barack Obama. Former President Biden appointed her as a Fed director, and her term was later extended. Her term runs until January 2038. She currently serves as an ex officio member of the FOMC. Cook dismissed the resignation pressure, stating, "I will not step down due to harassment."

The FOMC consists of 12 members. In addition to Chair Jerome Powell, the board’s 7 members and the President of the Federal Reserve Bank of New York attend by default; every year, 4 out of 11 other regional Federal Reserve Bank presidents join on a rotating basis. This year, it’s the turn of the Presidents of the Federal Reserve Banks of Chicago, St. Louis, Kansas City, and Boston.

Excluding the vacant seat of Director Kugler, out of the 6 board members, Vice Chair Michelle Bowman and Director Christopher Waller have publicly supported a rate cut. On the other hand, Chair Powell, the other 3 directors, and 4 regional bank presidents lean toward cautious consideration of inflation risks. However, Susan Collins, President of the Boston Fed, mentioned in June that additional rate cuts are possible.

If, in addition to Kugler, Cook is also replaced, 4 out of 7 board members would be Trump appointees. This could shift the FOMC’s tone as well. If the Fed loses its independence and easily responds to President Trump’s demands for rate cuts, trust in U.S. dollars and bonds could be shaken in the financial markets.

According to the minutes released on this day for July, the FOMC participants generally agreed that prices would rise in the short term due to tariff effects.

Washington = Sang-eun Lee, Correspondent selee@hankyung.com