‘the Real Defendant Here Is Kevin Warsh’

Kevin Warsh’s job just got a lot harder.

President Donald Trump’s latest threat to oust Federal Reserve Gov. Lisa Cook reignites his bid to subjugate the central bank and raises fresh questions about the Fed’s political autonomy.

Now, it will fall to Warsh, Trump’s new Fed chief, to figure out how to steer the institution through the turmoil.

The president, who was already blocked once from removing Cook by the Supreme Court over due process concerns, is taking another run at it by forming a panel of administration officials to examine her statements about home loans, which he and his aides have alleged are evidence of mortgage fraud. He demanded that Cook appear at a White House hearing next month to defend herself.

“But the real defendant here is Kevin Warsh because his legacy is going to be defined by how he protects the Fed,” said Peter Conti-Brown, an expert in Fed history and politics at the Wharton School at the University of Pennsylvania. “And whether he likes it or not, Lisa Cook, in this instance, is the Fed.”

Trump’s attack on Cook, which drew sharp rebukes from some lawmakers, comes at an already fraught time for Warsh and his fellow central bankers, who raised interest rates last month over concern that inflation is not cooling enough. That helped reassure markets that Warsh is willing to take action to restore price stability, but it also set up a clash with Trump, who has repeatedly insisted that the central bank should cut borrowing costs.

The president didn’t directly criticize Warsh for the rate hike, saying instead that he is controlled by “a very hostile board.”

The president’s action against the Biden-appointed Cook, announced Friday, suggests he’s still actively seeking pathways to control the central bank’s board, where he has previously expressed interest in having a “majority.” Trump has also threatened former Chair Jerome Powell, who remains on the Fed board, in recent days, citing an inspector general report that indicated the central bank’s massive headquarters renovation project was poorly managed but found no grounds for the Justice Department to reopen a criminal investigation.

“If he doesn’t resign, he should be sued, at the highest level, by the United States Government, for either corruption or incompetence, both of which are completely unacceptable,” Trump wrote on Truth Social last week about Powell. Attorney General Todd Blanche told Bloomberg News his department would not bring criminal charges against Powell but did not rule out future probes stemming from an audit of the construction project.

Mark Paoletta, the acting director of the Consumer Financial Protection Bureau and a senior White House official, also said in a social media post Thursday that Powell should be “subject to additional investigation” and called on him to “resign in disgrace.”

Notably, if Democrats retake control of the Senate in the midterm elections, that would limit Trump’s ability to add additional people to the Fed board, even if he is successful in removing Cook.

The underlying facts in Cook’s case have not been litigated, and her lawyers have repeatedly argued that she did nothing wrong. After the White House announced the new panel looking into her statements, Cook’s attorneys cast doubt on the legitimacy of the move and said she is innocent.

“In light of the President’s repeated statements that he has already decided to fire Governor Cook — regardless of the facts and evidence — we have grave doubts that this ‘hearing’ is a legitimate one that would conform to the law,” Abbe Lowell and Norm Eisen said. “We have engaged with the White House to evaluate whether the process proposed has a possibility of being a genuine one and not simply a box-checking exercise.”

Economists view the central bank’s independence from the White House as crucial to its global credibility, giving it the freedom to set interest rates based on what’s best for the economy long term, rather than on short-term partisan considerations. Trump’s drumbeat of criticism of Powell and his push for lower rates led to concern that Warsh would have insufficient distance from the president, with Sen. Elizabeth Warren (D-Mass.) deriding him as a “sock puppet.”

Lawmakers of both parties have pushed back on Trump’s efforts to dismiss Fed officials, and the move against Cook sparked a backlash from senior Democrats, including Senate Minority Leader Chuck Schumer. “This has nothing to do with ‘ethical concerns,’” he said on X. “It’s about Trump trying to seize control of the Fed, something that would mean even more economic chaos for American families.”

Outgoing GOP Sen. Thom Tillis of North Carolina, in a statement, blamed Federal Housing Finance Agency Director Bill Pulte, saying the regulator should “take the shovel out of his hand and stop embarrassing the President.” Pulte, a close Trump ally, first referred Cook’s mortgage documents to the Justice Department last year.

On the other hand, Sen. Cynthia Lummis (R-Wyo.) called the Cook probe an effort to “bring accountability and transparency” to the central bank.

The question now is how Warsh will approach the situation. Powell as chair did not directly condemn Trump’s previous attempt to remove Cook, but he pointedly attended Supreme Court oral arguments during the prior litigation and called it “the most important legal case in the Fed’s 113-year history.”

For Warsh, “there’s a real risk that silence will be read as being complicit in an effort to undermine the rigorousness and the robustness of the for-cause protection that has been fundamental to the Fed’s independence,” said Kathryn Judge, a professor at Columbia Law School.

But Conti-Brown said Warsh might take a more behind-the-scenes approach to head off worse scenarios for the Fed.

“His theory of the case is to use all of his formidable tools of charisma and charm behind the scenes to try to disengage, try to de-escalate,” he said. “The problem is that the Supreme Court sent a quite detailed invitation to President Trump. ‘You did it wrong the first time. Here’s how to do it right.’ And so far, President Trump is simply following the instructions that the Supreme Court left in their majority opinion.”

Jasper Goodman contributed to this report.