Trump's Fed Coup

Plus: Beachy vignettes, Smithsonian scrutiny, Gavin Newsom might not be the Democrats' great new hope, and more...

She's cooked: Lisa Cook, one of seven Federal Reserve Board members, was fired "for cause" by President Donald Trump earlier this week for what he calls "deceitful and potentially criminal conduct." The claim is that she committed mortgage fraud by declaring two residences to be her primary (and thus tax-advantaged), purchased within a few weeks of each other—sloppy, and somewhat common, and also not something that's been proven as of now. Cook is suing. The rest of the Federal Reserve Board is left wondering how exactly they should handle this situation: Does Cook still have a job? How long will it take this lawsuit to wend its way through the courts? Do you adhere to Trump's dictates whenever they're issued? How legal is this for-cause firing anyway?

"Does 'for cause' require something more substantial than a mere allegation of wrongdoing, such as a formal charge, or a conviction, or even something else?" asks Reason's Damon Root in a great piece on the precedent the Supreme Court might lean on (Namely Humphrey's Executor v. United States (1935) and Seila Law v. Consumer Financial Protection Bureau (2020)). "Here's another question to ask: Is the mortgage fraud allegation that's been leveled against Cook merely a pretext designed to cover the fact that Trump is actually firing Cook for illegal political reasons?"

Vice President J.D. Vance has been out there working overtime to spin it. "The question is: Do we want a person who makes a mistake like that to be a person who sits on the Federal Reserve Board, which makes important monetary policy for the entire country?" asked the vice president in an interview with USA Today. "Whether it's criminal, whether it's intentional or not, we know that this is a person, I think, who doesn't meet the standard that we should expect for the Federal Reserve, which is why the president fired her and he does have the legal right to fire her."

"I don't think we allow  bureaucrats to make decisions about monetary policy and interest rates without any input from the people that were elected to serve the American people," he added. "POTUS is much better able to make these determinations."

I don't think democratically setting monetary policy would go very well, truth be told. I am glad the Federal Reserve Board is appointed, and for long terms (14 years), in an attempt to somewhat insulate them from partisan politics (notice the hedging there, because I suffer from no delusions that they're in no way political actors; see QUICK HITS below, or the timing of some of the rate changes in the lead-up to the 2024 election). And Trump setting monetary policy, contra precedent, would not be especially democratic or yield especially good results: I did not anticipate or hope for a Trump-Fed coup when I voted for him, and undermining of these institutions—whether it's the MAGA-led initiative to get total control of the Fed or Democrats' court-packing pipe dream that would destroy the Supreme Court—is not something I, or many other voters, support. Do we really think Trump will be measured and moderate when it comes to rate-setting? Or do you think it might end up being just another impulsive decision oriented toward making his economy look good, with little eye toward longer-term consequences?

Trump's mismanagement of the economy seemingly won't stop with bad fiscal policy; now he's making clear his belief that the executive ought to have total power over monetary policy too. Whatever could go wrong?

Turkish President Recep Tayyip Erdogan provides a tidy recent example: He wanted lower interest rates, which he believed would tame inflation. Lowering interest rates sent inflation soaring. From 2018 to 2021, he kept firing the heads of the central bank, dissatisfied with how they handled rate-setting. "In March 2021, Turkey's inflation rate stood at 16.7%," reports CNN. "By October 2022, the rate had peaked at 85.5%. Those price rises precipitated repeated cuts to Turkey's base interest rate, falling to a low of 8.5% in February 2023. The Turkish lira was propped up through much of that turbulence through the use of foreign currency reserves, which put Turkey on the brink of a debt crisis."

(For an episode with a defense of phasing out the Fed, or at least making it a little more Austrian in nature, check out the Bob Murphy Just Asking Questions linked below; lots of good libertarian arguments out there.)

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Scenes from New York: I love this sweet vignette of a very beachy family trying to hold on to their tiny sliver of land in the Hamptons.

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QUICK HITS

• Really good conversation on the government taking a stake in Intel, Donald Trump's firing of Lisa Cook, whether the Fed was ever really politically independent, and much more:

• Related: Inside Lisa Cook's social justice warrior past.
• "Federal Housing Finance Agency Director Bill Pulte sent a new criminal referral against Federal Reserve Governor Lisa Cook, intensifying the Trump administration's pressure campaign against the central bank board member over allegations of mortgage fraud," reports Bloomberg. "The new referral, in a letter to US Attorney General Pam Bondi dated Aug. 28, concerns a third property in Massachusetts and follows a complaint earlier this month alleging that Cook fraudulently listed homes in Michigan and Georgia as her 'primary residence' when she obtained mortgages in 2021, a declaration that typically secures more favorable loan terms. The latest complaint alleges Cook took out a mortgage agreement on a condominium in Cambridge, Massachusetts for $361,000, claiming that the property was a second home. Pulte alleges that eight months later, however, Cook declared that she had earned between $15,000-$50,000 in rental income and declared it an investment property."
• Close readers of this Washington Post piece may notice how the Smithsonian was trying to put up a portrait of a transgender person posing as the Statue of Liberty. You can see how this type of thing (Amy Sherald's "Trans Forming Liberty") predictably increases Trump admin scrutiny of the institution, and makes the National Portrait Gallery a little boring when it's the exact type of art that's selected again and again and again.
• Gavin Newsom, ngmi:

I can't decide what shocks me more: how ghoulish this comment is, or how stupid. This is their vaunted operator? The guy who is going to beat Trump at his own game? Pathetically ill-advised. https://t.co/PjR3oROz5M

— Payton Alexander (@AlexanderPayton) August 29, 2025