Trump fires The Federal Reserve Board of Governors with the intention of controlling the Central Bank, and interest rate cuts may no longer require Powell's approval | Analysis of the impact on the crypto market

The move by U.S. President Trump to dismiss Federal Reserve Board of Governors member Lisa Cook could become a key step in his effort to completely rewrite the history of Central Bank independence. If successful, Trump could control interest rate policy by restructuring the FOMC and appointing loyal officials without needing to replace Chairman Powell. This article analyzes how Trump has mastered the nomination situation at the Federal Reserve Board, the power to dismiss regional bank presidents that has never been used in 112 years, and the potential impact of this action on interest rate decisions, economic stability, and the Crypto Assets market.

[Trump's Game with the Fed: From Criticizing Powell to Firing Cook]

Trump and Fed Chairman Powell have clashed multiple times over interest rate policy, and although he once threatened to fire the latter, the president has no legal authority to dismiss the Chairman of the Fed. However, last night, Trump shifted strategies and directly announced the firing of Federal Reserve Board of Governors member Lisa Cook.

Cook publicly refused to resign, claiming that "the president has no right to do this," and stated that he would file a lawsuit. It is worth noting that Powell had extended an olive branch to Trump last week, and this sudden development has raised the alert of traditional finance (TradFi) analysts, with many pointing out that this could be the beginning of the end of the Fed's independence.

[Why Target Cook? The Power of the Seven-Person Council and Trump's Calculations]

The Fed is managed by a board of seven governors who are appointed by the president but operate independently. These governors not only approve the candidates for the regional Federal Reserve Bank presidents but also have the power to dismiss them at any time—although this power has never been used in the 112-year history of the Fed.

If Trump succeeds in firing and replacing Cook, he will effectively control the majority of the board seats:

1. Two governors have been appointed for the first term.

2. Nominated the third person this year.

3. After Cook's replacement, he will become the fourth person.

This means that Trump can restructure the FOMC and replace regional presidents with differing views through a majority vote of the Board of Governors, thereby substantially controlling monetary policy without affecting Powell's position.

[Breaking Tradition and Precedent: The Unused "Arbitrary Recall Power"]

Financial analyst Jim Bianco pointed out that the regional Fed presidents are essentially "arbitrarily appointed" employees, and the Board can vote to remove anyone without reason. Historically, there have been only two abstentions (both votes against Democrat chairman Austan Goolsbee appointed by Trump in 2023), with no cases of veto.

Tradition and precedent were once the only forces restraining this power, but these norms have been broken multiple times since Trump's term. If the Supreme Court supports the dismissal of Cook, there will be no legal mechanism to prevent Trump from further restructuring the Fed.

Impact on Crypto Assets: Short-Term Benefits and Long-Term Risks Coexist

If Trump successfully takes control of the Fed, he may quickly push for interest rate cuts. Looser monetary policy usually benefits risk assets like crypto assets, and he may even introduce economic policies that better align with the needs of the encryption industry.

However, this situation also hides significant risks:

1. Interest rate cuts may reflect economic concerns, with several bearish signals already present in the U.S. market.

2. The use of monetary policy as a political tool will greatly undermine the Fed's ability to respond to actual recessions.

3. The loss of Central Bank independence may trigger turmoil among international investors and the U.S. bond market.

Therefore, the crypto industry should not be overly optimistic about "Trump controlling the Fed". Although it may benefit from a loose environment in the short term, it could be harmed in the long run due to instability in the system and global economic uncertainty.

[Conclusion]

Trump's dismissal of Cook is no longer just a personnel dispute, but a deep challenge to the independence of the Central Bank of the United States and even the rules of the global financial system. If he successfully implements monetary policy through a majority in the Board of Governors, the Crypto Assets market may welcome a wave of growth driven by loose monetary policy, but it may come at the cost of macroeconomic stability and policy credibility. Investors should pay attention to the Supreme Court's ruling on this case, the progress of the restructuring of the Federal Reserve Board of Governors, and the direction of interest rate policy, while seizing potential opportunities and preventing the spread of systemic risks.