Former Federal Reserve Chair Janet Yellen has expressed concern over US President Donald Trump’s decision to remove Federal Reserve Governor Lisa Cook from her position. In an opinion piece published in the Financial Times, Yellen warned that this move marks a direct attempt to politicize the central bank, which she described as “profoundly dangerous.”
The controversy surrounds allegations of mortgage fraud against Cook, who has not been charged with a crime. The alleged incidents occurred before she took up her current position as a member of the Fed Board of Governors. Yellen argued that accusations alone do not constitute sufficient grounds for the removal of a Fed official.
Yellen’s comments come after Trump announced his intention to remove Cook, citing the allegations as the reason. However, Yellen countered that this reasoning is a “pretext to justify an autocratic power grab.” She emphasized that the move represents an attempt to exert influence over the central bank’s monetary policy decisions, potentially undermining the independence of the Federal Reserve.
The Federal Reserve plays a crucial role in setting interest rates, which has a significant impact on the economy. Yellen warned that if the central bank’s decisions are perceived as being guided by political considerations, its credibility could be compromised. This, in turn, could lead to inflation expectations becoming unstable and potentially threaten the dollar’s status as a reserve currency.
Cook, who is the first Black woman to serve on the Fed Board of Governors, has rejected Trump’s bid to remove her, stating that he lacks the legal authority to do so. The move is seen as an escalation of Trump’s efforts to influence the central bank, following his previous criticisms of Fed Chair Jerome Powell’s handling of interest rates.
The development has significant implications for the independence of the Federal Reserve and its ability to make decisions without political interference. As Yellen noted, the consequences of such a move could be far-reaching, potentially leading to higher inflation expectations and long-term interest rates. The situation highlights the importance of maintaining the independence of central banks in order to ensure the stability of the economy.
