The Fed under attack

Katie Martin (0:06)

Pushkin. Listeners, this is not a drill. That man, Donald Trump, has been hammering away at the Federal Reserve for months, trying and failing to get rid of the chairman and succeeding in nominating a loyalist to a role at the world's most important central bank. Well, now he has upped the anti-Earl lot, claiming that he has fired Fed Governor Lisa Cook effective immediately. Can he do that? Well, she doesn't think so and nor does her lawyer. But the direction of travel here is becoming incredibly clear. He wants control of this institution one way or another. This is an incredibly serious attack on an incredibly serious institution, not that markets appeared to care too much for now. Today on the show, we're going to ask, can he really do this? What happens next? This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a Markets columnist at the FT in London, where it's finally raining. It's been ages. And listeners, I have a special guest on the show today. Yes, it's a full Scouse takeover of the Unhedged pod. It's Claire Jones, who covers the Fed for us in Washington DC.

Claire Jones (1:21)

You like, do you like?

Katie Martin (1:24)

I caught you there.

Claire Jones (1:25)

I'm good or I'm boss, as I should say.

Katie Martin (1:29)

This is going to confuse the hell out of our American listeners.

Claire Jones (1:32)

I know. Boss is kind of great, but in Scouse.

Katie Martin (1:36)

Just bear with us. Claire, thank you for doing this. You have been fully beaten up by news these past few days. What a time to be a Fed reporter. Like how on earth? How are you dealing with this?

Claire Jones (1:50)

Oh, God, absolutely. Yeah, I've written about central banks for 18 years. There's been some dramatic times with financial crises of one stripe or another. But the scale of these attacks are what's really the most important central bank in the world is really quite something.

Katie Martin (2:10)

It is really something. Okay, so the main character in this whole thing, apart from Donald Trump, is Lisa Cook. Now, listeners might not be familiar with who she is. Who is Lisa Cook?

Claire Jones (2:24)

So Lisa Cook is one of the seven governors who sits at the Federal Reserve's board in Washington. Before she joined the Fed, she was an academic. She was nominated by the Biden administration in 2022 and then approved by the Senate. Since joining the Fed, she's kind of stuck with the consensus.

You know, as seen as someone who would tend to vote with Powell.

Katie Martin (2:55)

So that's the Fed chairman, Jay Powell. She normally agrees with him on stuff basically.

Claire Jones (2:59)

Yeah. Her appointment was also seen as significant at time and heralded at the time because she's the first black woman to sit on the board of governors of the Fed.

Katie Martin (3:08)

That's exactly the point I was about to make. It's very rare to see black women in these sorts of positions. And so there was basically someone who is very sympathetic to Trump, launched a set of allegations against her. Was it was it last week or the week before? It was very recent anyway. And so there's a series of allegations made against her.

Claire Jones (3:30)

Exactly. So early last week, there was a series of posts on X by Bill Poulty. Now, Bill Poulty is the Director of Federal Housing under Trump. He's also been an arch critic of the Federal Reserve. He's one of the people who's been very aggressive in attacking Fed chair, Jay Powell. He's called for him to resign on several occasions. He's been very involved in the attacks from the Trump administration about the Fed's renovation, which the Trump administration accuses of being ostentatious and so on. So there's a bit of backstory with this guy of him being quite a big Fed critic.

Katie Martin (4:17)

Bit of a Fed botherer, yeah.

Claire Jones (4:19)

So what we saw last week were a series of social media posts, the thrust of which was a letter that Poulty had sent to the Department of Justice, saying that he'd found evidence that Lisa Cook had committed mortgage fraud. Now, the allegations and the claims that he makes center on the purchase of two properties, which took place before Cook joined the Fed. They were in 2021 Now, he alleged that she bought a property in Michigan and said, that would be her primary residence. And then, alleged that a few weeks later, she bought a property in Atlanta and also said that that was going to be a primary residence too. And by doing that, committed mortgage fraud, he claims. And under that, kind of got a more favorable rate from the bank for the mortgage. So that happened last week. Cook, more or less immediately the same day, kind of came out and said, you know, she refused to resign and said she was gathering together the paperwork and would answer sensible questions on the allegations in due course. That was heading into Jackson Hole. So it was a very kind of tempestuous environment in which central banks really travel to the Grand Tetons for this, you know, what's usually been their kind of like crown and glory, this very well known, this very well regarded academic symposium.