In Trump’s Push to Fire Fed Governor, a Curious Target

President Donald Trump’s attempt to fire Federal Reserve Board Governor Lisa Cook is, as some see it, part of a bigger push to force the central bank to lower interest rates. But if that’s the case, Cook is an awfully curious target.

Of the 12 officials who sit on the rate-setting Federal Open Market Committee, she appears to be among the most likely to vote in favor of a rate cut when they meet next month.

Trump said this week that he was ousting Cook “for cause” after one of the president’s yes-men claimed that she had committed mortgage fraud. But she has not been charged with any crime or wrongdoing. As Michael Hiltzik of the Los Angeles Times has noted, “The accusations are so meager that whether the firing will stand is an open question.” Cook, who has vowed to stay at the Fed, is fighting back and has sued Trump.
 

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For months, Trump has been hectoring the Fed — and, in particular, Chairman Jerome Powell — to slash interest rates, while angling to fill the central bank’s board with allies who will do his bidding.

But why go after Cook of all people?

Other policymakers are more widely viewed as inflation “hawks,” predisposed to keep interest rates on the higher end so as to temper economic growth and prevent prices from potentially spiraling out of control. Cook, for her part, is seen by “many outside observers” as “a relative ‘dove,’” the New York Times has pointed out.

Perhaps, then, Trump’s attack on Cook is simply part of his larger attack on the Fed’s independence — a reflection of his unrestrained authoritarian impulses.

We also can’t ignore the other reality: that the president seems to have a problem with Black people in positions of power. Indeed, Trump’s attempt to remove the first Black woman to serve on the Fed’s board in its 111-year history can’t be divorced from the broader pattern of those he has chosen to denigrate.

For all of that, though, he and Cook find themselves on a similar page when it comes to trying to make sure that interest rates don’t hold back growth too much — albeit for very different reasons.

The president’s apparent aim is to boost an economy that he has undermined with a torrent of tariffs and myriad other missteps, as well as to lessen the cost of servicing the government debt he’s running up.

Cook, meanwhile, is well versed in the long struggle, often led by communities of color, to compel the central bank to stop giving inordinate attention to one side of its dual mandate — warding off inflation — and focus more on the other side: stimulating job creation.

“Employment is the key to a healthy economy,” Cook said in a 2023 speech, asserting that  “maximum employment” can pull in from the sidelines those who’ve dropped out of the labor force, promote business investment and stimulate “more ideas, including more diverse ideas, more invention and more innovation.”

A low jobless rate also does something else: It helps lift people’s pay as employers are forced to compete harder for workers. This is why, some suggest, corporate America has always been resistant to the notion of “full employment” — the point at which everyone who wants a job can find one.

“The brutal fact is that unemployment at ‘moderate’ rates confers a good many benefits upon the prosperous,” the late progressive economist Robert Lekachman explained in a 1977 Harper’s Magazine article. “If everyone could be employed, extraordinarily high wages would have to be paid to toilers in restaurant kitchens, laundries … and other humble positions.”

In her remarks, Cook traced the drive for full employment to Martin Luther King Jr. and other civil rights leaders, who recognized that without an adequate number of good jobs, it would prove impossible to “achieve the goals of freedom and political equality,” as she put it.

After King was assassinated in 1968, his widow, Coretta Scott King, took up the cause. “Among all the pressing issues and challenges facing America,” King declared to lawmakers in early 1978, “none is more important to the elimination of human suffering and to the advancement of social justice than the issue of providing jobs to all Americans.”

Cook recalled in her speech how as an undergraduate at Spelman College, she had a chance to meet King. At the time, Cook said, she hadn’t yet decided on a career, “but when I did, it was in part because of the belief that wise economic policy could accomplish some of the goals that Coretta Scott King devoted herself to.”

In the fall of ’78, due in large measure to years of lobbying by King and a network of churches and unions, President Carter signed the Humphrey-Hawkins Act.

As originally conceived, the bill would have guaranteed full employment by making the government the employer of last resort for anyone who couldn’t otherwise find a job. But the legislation was watered down until all that was left were objectives: that unemployment should not exceed 3% for people 20 years or older, and inflation should be reduced to 3% or less.

Even that was too much. Many at the Fed thought the goals contained in Humphrey-Hawkins were incompatible. Conventional wisdom among economists was that keeping unemployment very low would automatically translate into runaway inflation — even though those on the left insisted that this “trade-off” was nonsense.

For many years to follow, the bogeyman of inflation always seemed to be lurking in the minds of Fed decision-makers. Tackling unemployment was an afterthought at best.

“You have said that … it is now time to intentionally slow down the economy by raising the interest rates,” Rod Adams, a community organizer from Minneapolis, told Fed officials in a conversation arranged by the liberal Center for Popular Democracy in 2016. “Now, I don’t understand how you can think that. The unemployment rate for African Americans in Minnesota is still near 9%. Underemployment is double that amount. … If the labor market were truly healthy, people in our community would all be able to find full-time jobs for decent wages.”

In 2020, the Fed altered its stance, indicating that it would no longer raise rates “preemptively,” thereby triggering “an unwarranted loss of opportunity for many Americans,” as one official characterized the shift. In fact, by this point, many economists had slowly changed their minds about the relationship between inflation and unemployment, as the nation enjoyed a prolonged period with low levels of both in 2018 and 2019. It was proof, as Cook described it, that the unemployment rate could reach and remain below what many “once predicted would overheat the economy.”

More recently, the picture has grown more complicated, first with the pandemic roiling the economy and now with the chaos Trump has unleashed.

Nonetheless, Powell signaled last week that the Fed is poised to cut rates again in September. Given her appreciation of Coretta Scott King’s legacy, Cook is certain to be among those most attuned to growing weakness in the job market — and the devastation that a spike in unemployment would cause for millions of Americans.

Which leads one to assume that Trump’s dismissal of Cook must be motivated by something other than his desire to influence the direction of interest rates. Because if it were really just about that, you wouldn’t add to your enemies list someone who isn’t actually your enemy.

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