Trump is fine trashing the Fed for a few measly rate cuts

Welcome to Trendlines. The secret password is “Kirk out of context.”

I am Boston Globe financial columnist Larry Edelman and today I look at why the Federal Reserve’s independence from political influence matters.

➕ Teddie Peanut Butter goes national.

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✋ Hands off

Don’t it always seem to go that you don’t know what you’ve got ‘til it’s gone.

Joni Mitchell wasn’t singing about the Federal Reserve — can you imagine! — but the message still applies.

President Trump moved this week to fire Lisa Cook, a Biden appointee, after one of his political attack dogs alleged that she lied on two mortgage applications.

It’s a serious claim, one that could warrant Cook’s removal. But it should be investigated before she is dismissed — something that has not happened to a Fed governor in the 112-year history of the central bank.

🔁 Catch up

Cook on Thursday sued Trump, calling his attempt to fire her “unprecedented and illegal.” A lot is riding on the outcome.

If Trump succeeds, it would undermine the Fed’s independence, which is central to investors’ confidence in US financial markets. Scott Bessent, Trump’s Treasury secretary, has called the central bank’s independence a “jewel box that’s got to be preserved.”

Trump doesn’t care. He wants the Fed to follow orders — in this case, to slash interest rates. But the Fed, which Congress put beyond the control of the White House, isn’t like the rest of the executive branch.

Firing Cook before adjudication would also be a blow to due process and would eliminate the last vestiges of restraint on Trump’s power.

🖼️ The big picture

Trump has long coveted control of the central bank and its power to set interest rates.

He cajoled and berated Fed Chair Jerome Powell — whom he appointed — for not cutting rates quickly enough. He nearly fired Powell in April, but retreated after markets tanked and advisers warned it would trigger a court fight Trump might lose.

More recently, he blamed Powell for cost overruns renovating the Fed’s headquarters, then backed off his claim that it was a fireable offense.

🔢 Numbers game

Now Trump is attempting to shift the balance of power on the Fed’s seven-member board.

He nominated Stephen Miran, head of the White House Council of Economic Advisers, to fill the seat left open when Adriana Kugler resigned. Then Bill Pulte, director of the Federal Housing Finance Agency and a Trump loyalist, accused Cook of lying on two loan applications. Trump quickly called on Cook to resign; when she refused, he declared her fired.

If Trump succeeds, her replacement — combined with his two appointees already on the board and Miran — would put four of the seven board seats in the president’s hands.

🤔 Final thought

The Fed’s freedom from political interference is a big reason global investors are willing to accept lower interest rates on US government bonds and invest in American assets.

Investors seemed to take the unprecedented showdown in stride, perhaps because they don’t think Trump will prevail against Cook. Powell signaled last week that policy makers could cut interest rates as soon as September, a move investors have been clamoring for.

In a letter posted Monday night on social media, Trump explained his reason for seeking to fire Cook.

“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve,” he wrote. “In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”

That’s quite a statement from this president.

📈 Trending

Politics & Policy: CDC Director Susan Monarez has been fired after less than one month in the job, and several top agency leaders have resigned, after clashing with Health Secretary Robert F. Kennedy Jr.

Politics & Policy: A Trump official hinted at a federal takeover of South Station similar to what the government is doing at Union Station in Washington, D.C.

Tech: Commonwealth Fusion Systems, the MIT startup racing to build the world’s first working fusion energy device, raised $863 million from investors including Google, Nvidia, and Bill Gates.

🥜 The Closer

Ours is a Teddie Peanut Butter house. Chunky for sandwiches and toasted bagels, smooth for baking. For as long as I can remember.

Teddie is like candlepin bowling — mostly a New England thing.

But now more of the country will be able to enjoy it. The Globe’s Billy Baker reports:

“Over the past two years — driven by an extremely loud insistence from New Englanders who have settled elsewhere in the country — that familiar glass jar with a green lid has made its way onto the shelves of Whole Foods and Publix.

“It’s a cautious expansion, said Jamie Hintlian, the CEO who is part of the third generation to run the company . . . If anything, the sales team has found hundreds of ways to say no to retailers who want to carry the brand, Hintlian said, wary of straying too far from its core.”

Spread the joy, Jamie.

💔 Colleague lost: Lloyd Young, a longtime photo editor at The Boston Globe, was struck and killed while bicycling over the weekend on a narrow road in rural Illinois during an annual visit to see family. He was 57.

🙏 Thanks for reading. Have a fun and safe Labor Day weekend.