The Wall Street Journal editorial "Trump Controls the Federal Reserve": He may succeed, but the country will ultimately regret it

"The dismissal of Director Lisa Cook is clearly an attempt by Trump to bring monetary policy under his control. He may succeed, but the country will ultimately regret it." On August 26, The Wall Street Journal published a commentary titled "What If Trump Controlled the Federal Reserve?" sharply pointing out that Trump has long sought to control the Federal Reserve, and the dismissal of Director Cook on Monday evening is part of a power struggle he has initiated. This event may sacrifice any remaining independence of the Federal Reserve. The article mentions that Trump had previously restrained himself from dismissing Federal Reserve Chairman Jerome Powell, knowing that such an action could shake the markets and lead to protracted legal disputes. However, Cook has already indicated she will sue Trump over the dismissal decision. This means Trump will eventually face a legal showdown that could become a landmark case. The editorial characterizes the dismissal of Cook as a "carefully orchestrated power grab." It notes that Bill Pulte, Director of the Federal Housing Finance Agency (FHFA), announced a criminal referral against Cook on social media last week, laying the groundwork for this dismissal. Pulte claimed that Cook had declared two different properties as her primary residence in a mortgage application in 2021, which could constitute mortgage fraud to obtain favorable loan terms. The editorial acknowledges that intentionally providing false information in a loan application is a federal crime. However, it raises questions, noting that the public has not seen specific details or Cook's explanation, and suggests that this action may involve "selective prosecution," as Pulte's efforts to combat mortgage fraud seem to target Trump's political opponents. The article states bluntly: "Compared to the president's conviction on social media, Cook deserves a more thorough due process." The Legal Battle of "Dismissal for Cause" So, can the president really dismiss Federal Reserve directors at will? This is the crux of the issue. The editorial explains that the criminal referral is not only a threat to other Federal Reserve directors—'either lower interest rates or get out'—but more importantly, it provides Trump with an excuse to 'dismiss for cause' Cook. In his letter to Cook, Trump wrote that the criminal referral provided "ample reason" to believe she had "demonstrated serious negligence in financial transactions, raising doubts about her ability and credibility as a financial regulator." The key here lies in the ambiguity of the law. Federal law allows the president to "dismiss for cause" Federal Reserve directors, but does not clearly define what "cause" specifically refers to. In contrast, other regulations that protect heads of independent agencies define "cause" as "misconduct, neglect of duty, or malfeasance during their tenure." Cook's side is likely to argue that the president cannot dismiss her for alleged misconduct that occurred before her appointment and has not been substantiated. If Trump succeeds this time, the "dismissal for cause" protections for directors would be rendered meaningless. On the other hand, the Department of Justice may argue that restricting the president's power to dismiss directors violates the principle of separation of powers, as these officials exercise executive authority. In fact, this administration has used this argument when removing other so-called independent agency members The Supreme Court did indeed allow the president to dismiss members of agencies such as the National Labor Relations Board this spring, but its unsigned opinion specifically mentioned that this decision does not necessarily apply to Federal Reserve governors. The court's opinion stated that “the Federal Reserve is a uniquely structured quasi-private entity, following the unique historical traditions of the First and Second Banks of the United States.” Although this statement does not have precedential value, it suggests that the Supreme Court may treat the Federal Reserve differently. Historical Warnings and Future Risks The editorial further analyzes that if Trump wins this legal battle, he will be able to arbitrarily dismiss other board members, essentially controlling the Federal Open Market Committee (FOMC) that decides interest rates. The article warns that while this may please those who believe the Federal Reserve should not be independent of presidential power, it is not a wise move for the national interest. The lessons of history are profound. The article cites the views of other experts and historical cases to illustrate what happens when the Federal Reserve becomes a tool of politicians? Turkey under President Erdogan and Argentina's decades of high inflation are clear evidence. Even the United States has had its lessons: Richard Nixon pressured then-Federal Reserve Chairman Arthur Burns to maintain loose monetary policy, resulting in the inflation of the 1970s. Ironically, the editorial argues that Trump does not need to provoke this legal battle at all. Chairman Powell's recent remarks have already hinted at a shift in interest rate policy. Moreover, Trump could completely change the Federal Reserve through normal channels—by nominating new board members, including a new chairman next year. However, the article points out that this does not seem to satisfy Trump, who arrogantly believes he can personally control monetary policy. The article questions, “Has he considered what a politically manipulable Federal Reserve might do when a future left-wing progressive president takes office?” The article reiterates its core point at the end: Trump's actions are entirely driven by “short-term tactics and personal political interests, with no regard for the integrity of the institution.” If he successfully controls the Federal Reserve, he and the Republicans will bear full responsibility for the ensuing consequences—including any potential return of inflation. The warning from this editorial is clear: Trump may legally win this battle, but the cost will be the end of the Federal Reserve's independence, and this country will ultimately regret it