— A fast-moving legal fight over the attempted removal of a sitting Federal Reserve governor, paired with fresh nominations, could soon hand President Donald J. Trump greater sway over the central bank’s seven-member Board of Governors — and, by extension, influence over interest rates, Wall Street oversight, and the leadership of the 12 regional Fed banks.
Key Takeaways
- The White House seeks a board majority by filling vacancies and, if courts agree, removing a governor “for cause.”
- Stephen I. Miran, a Trump economic adviser and Fed critic, has been nominated to replace Adriana D. Kugler after her early departure.
- Governor Lisa Cook is fighting removal in court; she has not been charged with a crime and argues the legal standard has not been met.
- The Fed’s rate decisions are set by a 12-member FOMC, but a bloc of governors can shape debates and public expectations.
- A board majority could pressure regional bank leadership via five-year reappointments due by March.
- Regulatory policy for big banks is controlled by the board, allowing rapid shifts with a simple majority.
- Only three FOMC members are needed to call special policy meetings, a rule allies could use to press agenda items.
- Former officials warn that politicizing personnel and decisions could damage the Fed’s credibility at home and abroad.
Verified Facts
President Trump has repeatedly urged Chair Jerome H. Powell to cut interest rates and has signaled he wants a friendlier majority on the Board of Governors. With seven seats in total, securing four aligned governors would tilt internal debates, even though rate decisions are ultimately made by the 12-vote Federal Open Market Committee (FOMC) — the seven governors plus five rotating presidents of regional Reserve Banks.
Adriana D. Kugler resigned months before her governor term was due to end. The president named Stephen I. Miran to succeed her; if the Senate confirms him before the next policy meeting in September, the administration would be one seat closer to a reliable voting bloc.
Separately, Governor Lisa Cook has filed suit to keep her job after the White House cited mortgage-fraud allegations to justify removal. The Federal Reserve Act allows presidential removal of a governor only “for cause,” generally understood as neglect of duty or malfeasance. Cook has not been charged or convicted and argues the allegations do not meet that threshold.
In Trump’s first term, Christopher J. Waller and Michelle W. Bowman joined the board, and Powell was elevated to chair. Powell’s current chair term ends in May, positioning the president to choose the next leader of the central bank.
Recent votes show rising dissent: Waller and Bowman opposed holding rates steady last month, marking the first double dissent of that stature since 1993. Persistent board-level dissents could reframe internal deliberations and how markets interpret the path of policy.
Context & Impact
Board control reaches beyond rates. The seven governors alone approve rules and guidance that shape capital, liquidity, and stress testing for the largest banks. With a majority, the administration could quickly pivot regulatory priorities, including tailoring supervision and recalibrating proposals in the pipeline.
The board also reviews five-year reappointments of all 12 Reserve Bank presidents; what is usually routine could become consequential by March. In 2022, Waller and Bowman abstained on approving Austan D. Goolsbee to lead the Chicago Fed, underscoring how personnel decisions can become flashpoints.
Structural levers exist as well. Legal scholars note the board likely has authority to adjust the geographic lines of the Federal Reserve districts, though whether a district can be eliminated is unclear. The board also influences the Fed’s balance sheet plans and swap-line operations with foreign central banks during market stress.
Process matters: It takes only three FOMC participants to call an additional meeting. If aligned governors repeatedly trigger special sessions to push for faster easing, markets could face heightened volatility and mixed signals about the policy outlook.
Official Statements
With four aligned governors, the administration could meaningfully steer board actions and priorities.
Gary Richardson, University of California, Irvine
Control by March could be used to displace some Reserve Bank presidents during reappointments.
Janet L. Yellen, former Fed chair and former Treasury secretary
Calling extra FOMC meetings with a small group could invite mischief that affects monetary policy substance.
Graham Steele, former Treasury official
Board authority likely extends to redrawing regional boundaries, though full elimination of a district is uncertain.
Kathryn Judge, Columbia Law School
Eroding the Fed’s independence risks projecting dysfunction rather than the prudence markets expect.
Douglas Rediker, former U.S. representative to the IMF
Explainer
Unconfirmed
- Whether a court will allow the removal of Governor Lisa Cook based on current allegations.
- Timing and outcome of Stephen I. Miran’s Senate confirmation ahead of the next policy meeting.
- Which, if any, Reserve Bank presidents might be denied reappointment by March.
- Whether the board would attempt to redraw Federal Reserve district lines — and how far that authority extends.
- Potential scope and pace of personnel changes among career staff at the board.
Bottom Line
If the administration assembles a dependable majority on the Board of Governors and prevails in court, it could rapidly redirect the Fed’s regulatory stance, complicate rate deliberations, and pressure regional leadership. Supporters call it a course correction; critics warn it risks undermining the central bank’s independence, a cornerstone of policy credibility and market stability.