As Cook case smolders, Trump has other paths to shape Fed policy team

U.S. President Donald Trump's efforts to oust Federal Reserve ​officials to clear room for his own appointees have been stalled so far by the courts ‌and political ​pushback in the Senate, but he may still have as many as four opportunities to try to beef up his influence over the central bank's policy committee. Trump has so far stood behind Fed Chairman Kevin Warsh even though his handpicked appointee sidelined talk of the interest rate cuts thepresident has been demanding. Warsh also set aside all rate guidance in June, shortly after becoming head of the central bank. While Warsh has talked often about the "incredible ‌team" at the Fed — an institution designed to be insulated from politics by having only two of the seven seats on its Board of Governors expire in any one presidential term — Trump last month said he regarded the central bank's board in general as "maybe a little bit hostile," and as standing in Warsh's way. "I know he would love to see lower interest rates. But he has got a board, and it's a political board," Trump said. Though Trump's initial efforts to clear room at the Fed have been stymied, the battle to control monetary policy hasn't ended and could shift with the outcome of several personnel battles and ‌decisions.

COOK CASE Fed Governor Lisa Cook, the first Black woman to serve on the central bank's board, was appointed by former President Joe Biden in 2022 to a term that lasts until 2038. Trump tried to fire her a year ago in a case that ended with the U.S. ‌Supreme Court affirming that the president could not remove a Fed governor without adequate cause and needed to follow a clear process to lay out the reasons and undergird it with evidence. The ruling left Cook in her position but kicked the case against her back to a federal district court. The administration has chosen to pursue the matter, arguing that a misstatement on a mortgage document years ago was adequate "cause" for firing Cook. The White House has demanded she reply by Wednesday to a letter laying out its case for her removal. Cook, who calls the administration's effort a pretext to gain sway over interest rate policy, will almost certainly continue to fight her dismissal, with another potentially protracted court battle ahead before a final ruling. ⁠Cook likely will remain ​on the board in the meantime.

WARSH'S PREDECESSOR HANGS AROUND The head of the central ⁠bank for more than eight years until May, Fed Governor Jerome Powell has chosen to continue serving on the board. His term lasts until early 2028, the final full year of Trump's term. The end of Powell's tenure will provide the only certain Fed seat for Trump to fill during the remainder of his time in the White House. But the president's earlier ⁠efforts to oust Powell — whom Trump first elevated to the top Fed job — are not fully put to rest. He mulled firing Powell at several points, and the administration launched a criminal investigation related to a central bank building renovation project that had run over budget. The criminal probe was dropped after a retiring Republican senator vowed to block Warsh's ​nomination as Fed chief until the case was put to rest. In dropping the probe, however, U.S. Attorney for the District of Columbia Jeanine Pirro said she was deferring to a separate Fed Inspector General's investigation that Powell himself had already set in motion. The findings of ⁠that investigation could prompt another effort to remove Powell, though it is unclear when it will conclude.

THE VICE CHAIR'S PLANS Fed Vice Chair Philip Jefferson will next year face the same choice Powell did when his leadership term expires: Decide whether to leave or remain in a governor's seat that lasts until 2036. Typically, Fed vice chairs have left the central bank when their leadership terms ended, sometimes ⁠even ​before. Jefferson, who was also appointed by Biden, has not spoken about his plans, and — as one of the less public of the Fed's current policymakers — he has not been under the same spotlight or pressure as Cook, for example. His choice could be pivotal to Trump's hopes of appointing more Fed governors. It could inconvenience the president in another way: If Jefferson chooses to continue on the board, Trump would have to choose a vice chair from within the narrow pool of current governors. Besides Warsh, Trump would have only two of his own appointees to choose from: Michelle Bowman, who is already ⁠the Fed's vice chair for supervision, and Fed Governor Christopher Waller, who was on the short list to replace Powell and relishes his role as a more independent, follow-the-data policymaker. ATLANTA FED OPENING Beyond the board, the Fed's 12 regional reserve bank presidents play an important role in policymaking. Five of ⁠them vote on interest rates on a rotating basis, and all participate in shaping monetary ⁠policy at the central bank's rate-setting meetings, currently numbering eight a year. Regional Fed presidents are chosen by their local boards of directors, but must be approved by the Washington-based Board of Governors. The top job at the Atlanta Fed has been open since February 28. After nearing agreement on a finalist, the process was delayed to give time for Warsh to take over and vet the selection. Regional Fed jobs have not traditionally been seen as ‌a pathway for White House influence. Notably, it was ‌three regional bank presidents who dissented in favor of a rate hike at the Fed's July 28-29 meeting, which was only Warsh's second as head of ​the central bank.