Janet Yellen, the former chair of the Federal Reserve, has issued a stark warning about the potential fallout from President Donald Trump’s recent attempt to dismiss Fed Governor Lisa Cook.
Yellen Warns Trump Move Threatens Fed Independence, Dollar
In a recent op-ed for the Financial Times, Yellen criticized Trump’s move to “fire” Cook, stating that it is not only illegal but also poses a significant threat to the independence and credibility of the Federal Reserve.
“Politicized central banks deliver higher inflation, volatile growth and weakened currencies. Such a road cannot be good for the U.S.,” stated Yellen.
She also cautioned that the U.S.’s economic stability and global leadership, both of which are underpinned by the Fed’s independence, could be at risk. “The consequences are likely to be catastrophic,” warned Janet Yellen.
By law, Federal Reserve governors serve 14-year terms to prevent them from being dismissed by presidents who disagree with their views or seek their loyalty. The “for cause” removal is meant for documented misconduct, not “accusations,” stated Yellen.
This action sends a “chilling” message to all members of the Federal Reserve board and the regional reserve bank presidents who participate in the Federal Open Market Committee, stated Yellen.
The former Fed chair also pointed out that the move could potentially undermine the U.S. dollar’s status as the world’s reserve currency and erode global confidence in Treasury securities.
Lawsuit, Backlash Mount Over Trump's Bid To Oust Cook
Trump’s attempt to dismiss Cook has sparked widespread concern. Cook’s lawyer, Abbe Lowell, has announced that she will be filing a lawsuit to challenge the president’s action, arguing that it lacks any factual or legal basis.
This move has been supported by several prominent figures, including Senator Elizabeth Warren, who described Trump’s decision as an “authoritarian power grab.”
Meanwhile, billionaire investor Bill Ackman has called on Cook to address the allegations of mortgage fraud directly, warning that the integrity of the American financial system remains at stake. The outcome of this dispute could have far-reaching implications for the U.S. economy and its position in the global financial landscape.
According to Craig Shapiro, macro strategist at the Bear Traps Report, Trump's dismissal of Lisa Cook could mark a major power shift at the central bank, paving the way for a Trump-appointed majority on the board and fueling concerns about the fate of regional Fed presidents
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
