ARI SHAPIRO, HOST:
President Trump is trying to fire a member of the Federal Reserve's governing board, but Lisa Cook is not going quietly. Cook and her attorney say Trump has no authority to remove her from the central bank, and they've promised to challenge her dismissal in court. The conflict marks a new chapter in Trump's campaign to wield more control over the central bank. NPR's Scott Horsley is covering this. Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi, Ari.
SHAPIRO: OK, so Trump said in a social media post last night that he has lost confidence in Lisa Cook. What's the backstory here?
HORSLEY: Well, this comes after Bill Pulte, a Trump loyalist who oversees mortgage giants Fannie Mae and Freddie Mac, accused Cook of making false statements on a mortgage application four years ago. That was before she was appointed to the Fed board by then-President Biden. Pulte says Cook applied for home loans weeks apart on two different properties in two different states and that she claimed each property would be her primary residence, which usually comes with more favorable loan terms. Now, this is just an allegation. There haven't been any formal charges. But Trump says it's reason enough for him to fire Cook.
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PRESIDENT DONALD TRUMP: We need people that are 100% above board, and it doesn't seem like she was.
HORSLEY: But Cook insists she's not going anywhere and that she'll continue to carry out her duties at the central bank. For the moment, financial markets are kind of in a holding pattern.
SHAPIRO: So if the two of them are in this standoff, what happens now?
HORSLEY: Cook and her attorney, Abbe Lowell, plan to file a lawsuit as early as tomorrow to have this firing set aside. Under the law, the Fed is supposed to operate independently from the White House, and Fed governors can only be fired for serious misconduct. Peter Conti-Brown, who's a Fed historian at the University of Pennsylvania, believes the allegation of mortgage fraud here is just a pretext. He says this is really about Trump's campaign to get the Fed to sharply lower interest rates.
PETER CONTI-BROWN: This is a dramatic escalation. And this is, in a sense, open warfare. This is the assault on Fed independence that many people have been clutching their pearls about. These aren't tweets. These aren't ad hominem attacks. This is a putative attempt to run roughshod over the Federal Reserve.
HORSLEY: In a statement this afternoon, the Fed underscored its commitment to operating independently and said it would abide by any court decision in Cook's lawsuit.
SHAPIRO: Beyond the Fed, there's kind of a pattern here of President Trump firing people who work for agencies that are supposed to be independent. Tell us about the track record.
HORSLEY: Yeah, he's managed to fire a number of people who ran nominally independent agencies, despite a 90-year-old Supreme Court precedent limiting a president's power to do so. Trump and his allies have been chipping away at that precedent. They argue no agency is really independent of the president's powers. Conti-Brown says a majority of the current Supreme Court seems inclined to go along with that argument, but maybe not when it comes to the central bank.
CONTI-BROWN: The Supreme Court has strongly hinted that it's going to abolish that legal protection in every part and every corner of the federal government with one exception, the Federal Reserve.
HORSLEY: Most economists agree that central banks around the world just work better when they're allowed to operate free from political interference. That way, they can take the sometimes-unpopular steps that are necessary, like raising interest rates to fight inflation.
SHAPIRO: So what happens if Trump is allowed to fire Cook?
HORSLEY: Well, Trump has already picked two members of the Fed's governing board, and he's in line to name a third. If he's also allowed to replace Cook, that would give him - Trump appointees a majority on the seven-member Fed board. Trump also gets to nominate a new chairman when Jerome Powell's term expires next spring. So all this could be a chance for this very hands-on president to exercise more control over the central bank, and it could potentially spell the end of the Fed's storied independence.
SHAPIRO: That is NPR's Scott Horsley. Thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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