Trump tries to fire a Fed governor — and sends the markets scrambling for cover

President Donald Trump's unprecedented attempt to oust Federal Reserve Governor Lisa Cook is sending some investors fleeing to safe havens, as social media-based grumblings escalate into a massive constitutional showdown over central bank independence.

In a Monday evening letter posted to Truth Social, Trump declared Cook "removed from your position...effective immediately," citing her alleged "gross negligence" in mortgage applications. Cook then responded, saying "no cause exists under the law" for Trump to fire her and vowing to stay put. Cook has not been charged with any crime.

The market reaction was swift

In the wake of the news, gold surged within shouting distance of its 52-week high as investors sought shelter. Treasury yields climbed overnight as bond investors grew jittery about the Fed's independence, while the dollar fell 0.2%. Heading into Tuesday’s market open, major indices, including the S&P 500, Dow, and Nasdaq, edged down.

The market moves likely reflect investor anxiety about institutional stability. Trump's attempts to oust Cook marks the first time in the Fed's 111-year history that a president has attempted to fire a governor, and legal experts question whether he has the authority to do it.

The law requires Fed officials be removed only "for cause"— typically severe wrongdoing in office. A recent Supreme Court decision strengthened the Fed's legal protections, calling it a "uniquely structured, quasi-private entity" shielded from presidential mass firings.

Crisis comes amidst broader attack

The chaos comes as Trump wages a broader campaign against the central bank, demanding rate cuts. And the irony is stark: Just last week, Powell signaled a rate cut may be on the way. “The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said, referring to Trump’s sweeping changes to tax, trade, and immigration policy.

But Trump's escalating attacks, including his attempt to fire Cook, are creating the kind of market chaos and institutional uncertainty that could give Fed officials pause. Central bankers prefer clear, stable conditions when making policy decisions, not constitutional crises over their independence. By sowing doubt about the Fed's autonomy, Trump may be undermining his own goal of cheaper money, potentially forcing Powell to delay cuts until the political storm passes.

“It’s a massive moment for the nation and the economy. Trump’s actions suggest he has his eye on a far more ambitious prize than just replacing Fed Chair Jerome Powell when his term ends next May. Instead, the president appears to want total control over the bank’s interest-rate setting structures,” wrote Politico’s Jack Blanchard on Tuesday morning. “Plenty of Fed watchers believe we’re seeing the greatest threat to its independence in generations.”