The Constitutional Firing Squad: Trump vs. The Fed

The President just grabbed Fed independence by the throat and squeezed.

Monday morning, Donald Trump fired Federal Reserve Governor Lisa Cook via social media post — the first instance of a president firing a central bank governor in the Fed's 111-year history. The reason? Allegations she lied on mortgage forms by declaring two primary residences. The justification? The Federal Reserve Act provides that she can be removed at his discretion.

Cook's lawyers had other ideas. "President Trump has no authority to remove Federal Reserve Governor Lisa Cook," they fired back, promising a lawsuit. By Thursday, Cook was in court suing to keep her job, setting up what may be the defining constitutional showdown of this presidency.

The markets, predictably, threw a tantrum. The dollar fell and longer-dated Treasury yields rose as Trump's push to remove Cook fueled concern about central bank independence and inflation risks. Because nothing says "stable monetary policy" quite like the Commander-in-Chief turning Fed governors into at-will employees.

But here's where it gets delicious: If Trump succeeds in removing Cook, he'll have appointed a majority of the Fed Board's seven members. "We'll have a majority very shortly," Trump said at the White House during a Cabinet meeting Tuesday. "So that'll be great."

Great for whom, exactly?

The 30-year Treasury yield spiked as bond traders contemplated a world where Fed independence becomes a quaint historical footnote. Because when you can fire governors for mortgage paperwork discrepancies, what's to stop you from firing them for refusing to juice the money supply before midterms?

This isn't just about Lisa Cook. This is about whether the institution that controls the world's reserve currency operates under the rule of law or the whims of whoever occupies 1600 Pennsylvania Avenue. Cook's lawsuit will likely hinge on whether Fed governors enjoy the same job protections as other independent agency heads — a question that somehow never needed answering in 111 years of Federal Reserve history.

A judge has set a Friday hearing, which means by the time you read this weekend's edition, we'll know whether American monetary policy operates under constitutional constraints or executive decree.

The bond market is watching. The dollar is watching. And somewhere in Jackson Hole, Jerome Powell is probably wondering if his mortgage paperwork is in order.

Trump's message to the Fed board is crystal clear: play ball, or play elsewhere. The only question now is whether the courts will let him get away with it.