Commentary: Trump's war on the Federal Reserve will backfire

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If he ever does gain control of the Fed, it could endanger the Trump economy, throw markets into a tailspin, and leave Trump's economic legacy in the basement alongside that of George W. Bush and Herbert Hoover.Trump's latest Fed attack is a threat to fire Lisa Cook, one of 12 voting members on the Fed committee that sets interest rates. Trump wants to install loyalists at the Fed who will slash rates and do whatever else he wants. Cook is a Biden appointee who, like Fed Chair Jerome Powell, has voted this year to keep rates steady. Most economists think the Fed has been right to sit tight on rates. Trump clearly disagrees.Trump thinks he found leverage over Cook because his top housing regulator, Bill Pulte, scoured millions of individual housing records looking for dirt and found that Cook declared two different properties as her primary residence when applying for bank loans. Trump claims that gives him the authority to fire Cook. But there's no formal charge against Cook, just the Trump-Pulte smear. Cook said she's staying in her job and will fully defend herself.Trump has not yet actually moved to fire Cook. He has only said he will do it. So Trump might be floating a trial balloon to see how markets react. But his plan to gain control of the Fed is self-evident. He has repeatedly pressured Powell to resign while nominating loyalist Stephen Miran to the rate-setting committee when Adriana Kugler unexpectedly stepped down in early August. Trump's broader plan may be to seed the rate-setting committee with friendly members by early next year, when the Fed must select the 12 presidents of the Federal Reserve banks — normally an uncontroversial process.Read more: How much control does the president have over the Fed and interest rates?Fed watchers are now debating whether Trump could actually pull enough strings to populate the rate-setting committee with a majority of allies willing to do his bidding. But there's no debate over how disruptive it would be if Trump pulled it off. "Trump's efforts to bend the Fed to his will are a genuine threat to US markets," Capital Economics explained in an Aug. 26 analysis. "Prolonged attacks risk pushing up long-term bond yields while weighing on the value of the dollar and potentially equity prices."Markets have already registered a negative reaction. Long-term interest rates rose slightly on news of Trump's plan to fire Cook, while the value of the dollar dipped. Those moves indicate greater worry about inflation due to bad Fed decision making. The moves were modest, but that may be partly because Cook hasn't left, and the Fed, for now, remains independent.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,476.25 -19.75 (-0.30%)Dow Futures45,617.00 -25.00 (-0.05%)Nasdaq Futures23,509.50 -119.25 (-0.50%)Russell 2000 Futures2,379.10 -0.60 (-0.03%)VIX14.85 +0.23 (+1.57%)Gold3,450.80 +2.20 (+0.06%)PortfolioSign in to access your portfolioSign inTop gainersMDB MongoDB, Inc. 295.70 +81.36 (+37.96%)SATS EchoStar Corporation 58.76 +7.89 (+15.51%)NCNO nCino, Inc. 32.69 +4.00 (+13.94%)LUMN Lumen Technologies, Inc. 5.27 +0.58 (+12.37%)PCT PureCycle Technologies, Inc. 14.86 +1.26 (+9.26%)Top losersTIGR UP Fintech Holding Limited 11.57 -1.25 (-9.75%)NEGG Newegg Commerce, Inc. 60.89 -6.14 (-9.16%)LI Li Auto Inc. 22.60 -2.05 (-8.32%)KNF Knife River Corporation 82.76 -7.39 (-8.20%)SMMT Summit Therapeutics Inc. 24.81 -2.17 (-8.06%)Most activeWBA Walgreens Boots Alliance, Inc. 11.98 +0.06 (+0.50%)OPEN Opendoor Technologies Inc. 4.0200 -0.6800 (-14.47%)NVDA NVIDIA Corporation 181.60 -0.17 (-0.09%)PSNYW Polestar Automotive Holding UK PLC 0.4700 +0.3100 (+193.75%)NIO NIO Inc. 6.34 -0.36 (-5.37%)Earnings eventsMy earnings eventsEarnings eventsTrending tickersNVDA NVIDIA Corporation 181.60 -0.17 (-0.09%)CRWD CrowdStrike Holdings, Inc. 422.61 +5.01 (+1.20%)SNOW Snowflake Inc. 200.39 +6.04 (+3.11%)LUMN Lumen Technologies, Inc. 5.27 +0.58 (+12.37%)CRWV CoreWeave, Inc. 96.93 +5.54 (+6.06%)Top economic events