Finance

President Donald Trump’s effort to sack Federal Reserve Governor Lisa Cook is a maneuver that would mark a seismic shift for an institution that for ages had been considered above politics.
Experts say Trump’s moves not only threaten to make the Fed more political but also would undermine key pillars of the American financial system.
For the administration’s part, Trump’s lieutenants largely say they believe in Fed independence but see the central bank as institution run amok that needs reigning in.

US President Donald Trump speaks during a meeting with Ukrainian President Volodymyr Zelenskyy and European leaders in the East Room of the White House in Washington, DC, on August 18, 2025.
Andrew Caballero-Reynolds | AFP | Getty Images

President Donald Trump’s effort to sack Federal Reserve Governor Lisa Cook is about more than firing someone: It’s a maneuver that, if successful, would mark a seismic shift for an institution that for ages had been considered above politics.
Since taking office in January, Trump has placed the Fed directly in the crosshairs of executive power. He has berated central bankers for not lowering rates, threatened to remove Chair Jerome Powell, and now has taken the unprecedented step of actually attempting to unseat Cook.

From the president’s perspective, he’s looking to reform what has been an unpopular institution, often blamed for the runaway inflation that hit the U.S. following the Covid pandemic. Trump sees lower interest rates as a pathway to manage the swelling federal debt while boosting a housing market that has been a counterweight to an otherwise growing economy.
However, legal scholars as well as financial market experts and present and former Fed officials say Trump’s moves not only threaten to make the Fed more political but also would undermine key pillars of the American financial system.
“We are on a road that is going to lead to the erosion of central bank independence,” said Kathryn Judge, a professor at Columbia Law School. “It would be incredibly costly for the long-term health of the economy for the Fed to lose the credibility that it has spent decades trying to build.”
Independence in the Fed’s case is a term used to describe its freedom from outside political influence to determine monetary policy that is best for the U.S. economy. This is particularly the case if those decisions are unpopular, such as when the Federal Open Market Committee raises interest rates to bring down inflation.
But there’s more at stake than simply the level of the three rates the Fed controls.

What the board controls, and what it doesn’t

Should Trump get a majority of members on the board of governors to vote the way he wants — and the evidence right now, to be sure, is scant that he can ever achieve such a goal — it would give him access to key levers that control the economy as well as the nation’s financial infrastructure.
The seven-member Board of Governors, for instance, has regulatory and enforcement power over banks.
Moreover, while the 12-member FOMC sets the key overnight funds interest rate, the governors alone establish the discount rate, used to find the present value of money, and the interest on reserve balances, which pays banks for storing their money at the Fed and also serves as a kind of guardrail for the funds rate.
Finally, the board has control over the reappointments of the 12 regional bank presidents, with a slew of names coming up in 2026.
Embedded within those responsibilities is the Fed’s role in ensuring the integrity of the Treasury system and preserving a stable dollar.
In other words, this is about more than just getting a rate cut in September.
“The most serious danger, I think, to people’s being able to have confidence in the Fed board is what Trump is himself doing,” said Robert Hockett, a professor at Cornell Law School. “Because if Trump succeeds with this, then it suggests the Fed board is nothing but a rubber stamp. It just basically tells us that any nutjob who happens to get into the White House will be setting monetary policy henceforth.”
The effect, Hockett added, is that “we can have the same kind of hyperinflations in the future that banana republics in Latin America have classically had when their dictators have set monetary policy, or that Turkey has experienced in recent years because its dictator has set monetary policy.”

What Trump wants to achieve

For the administration’s part, Trump’s lieutenants largely say they believe in Fed independence but see the central bank as institution run amok that needs reigning in.
However, the president has conceded he will litmus test nominees for board vacancies on their willingness to lower rates, and he in the past has advocated getting a say in the Fed’s rate decisions among other measures that might be considered intrusions into the central bank’s space.
“I don’t think it’s an undermining of Fed independence. I just think it’s the fact the system needs a wholesale reevaluation and President Trump just does things unconventionally,” said Joseph LaVorgna, a senior economist during the first Trump term and now counselor to Treasury Secretary Scott Bessent. “There definitely has been mission creep on behalf of the Fed getting into climate change and issues of diversity and inclusion and things that certainly go well beyond their mandate.”
In fact, the notion that the Fed needs an overhaul has support on Wall Street.
Mohamed El-Erian, the former Pimco executive and now chief economic advisor at Allianz, recently advocated that Powell step down as chair to avoid just the kind of battle over independence that is happening now. Moreover, he said the Fed’s own policy mistakes helped precipitate the current battle.

“This is the exact world that I was worried about,” El-Erian said Friday on CNBC. “The Fed is vulnerable on so many different fronts, and I fear now that we’ve started going down this road that I really dread.”
Among the reforms El-Erian spoke of included taking after the Bank of England and allowing “external members” onto its policymaking group “that bring a difference perspective and that help reduce the risk of groupthink.”
Also, he said the Fed should reconsider its 2% inflation target, something that Powell repeatedly has said is not on the table.

The end game

However, critics say that what Trump is talking about goes beyond mere structural reforms.
“This is really a story about trying to undo what had been 90 years of Fed independence,” former Fed Vice Chair Roger Ferguson said on CNBC. “The whole goal was to give the Fed independence in doing this very important thing, which is setting monetary policy. And now, for the first time, we’re seeing a direct effort to undermine that.”
How successful Trump will be in doing so is another matter.

Currently, he has two appointees, Christopher Waller and Michelle Bowman, on the board. Stephen Miran is awaiting Senate confirmation to fill the seat vacated by Adriana Kugler’s resignation. Should Powell leave next May when his term as chair runs out, that would create another vacancy and give the president five seats.
However, counting on all those members as automatic votes is risky.
Both Waller and Bowman have shown strong independent streaks, taking both out-of-consensus hawkish and dovish positions depending on circumstances, and are unlikely to be “little apparatchiks for Trump,” the Cornell professor Hockett said.
“It’s unfair to the sitting governors to assume that they’re willing to operate as partisan hacks,” added Judge, the Columbia professor.
Also potentially standing in the way is a series of court tests that will focus on whether Trump has “cause” to remove Cook or anyone else.
If the president succeeds, it could have wide-ranging effects on the economy and markets, said Krishna Guha, head of global policy and central bank strategy at Evercore ISI.
“We think the baseline case at this point should be that there is very substantial Trumpification of the Fed through 2026 and – while this does not automatically correspond to a big lurch in policy and practice – we need to very seriously consider the likelihood that this leads to a rupture with past practice and a materially different reaction function with important implications for markets,” Guha said in a recent note.
The stakes also are high for the Fed’s future as an institution.
“There’s never been as dire a threat to Fed independence in our entire history as a republic as there is right now thanks to what Trump is doing,” Hockett said. “I do think that long term confidence in our central bank and hence in our currency will take yet another hit.” More

Federal Reserve Governor Christopher Waller reiterated his support for an interest rate cut in September and opened the door to a potentially larger move if the labor market continues to weaken.
Waller said he believes the Fed can use its power over interest rates to stave off further labor market weakening. “So, let’s get on with it,” he said Thursday evening.

Christopher Waller, governor of the US Federal Reserve, during a Fed Listens event in Washington, DC, US, on Friday, March 22, 2024. A trio of central bank decisions this week sent a clear message to markets that officials are preparing to loosen monetary policy, reigniting investor appetite for risk.
Bloomberg | Bloomberg | Getty Images

Federal Reserve Governor Christopher Waller reiterated his support for an interest rate cut in September and opened the door to a potentially larger move if the labor market continues to weaken.
In a speech Thursday evening, the policymaker said he expects the August nonfarm payrolls report to be weak, with Bureau of Labor Statistics revisions indicating that the the economy may have lost jobs over the past several months.

“Based on what I know today, I would support a 25 basis point cut at the Committee’s meeting on September 16 and 17,” Waller said during the speech in Miami. “While there are signs of a weakening labor market, I worry that conditions could deteriorate further and quite rapidly, and I think it is important that the [Federal Open market Committee] not wait until such a deterioration is under way and risk falling behind the curve in setting appropriate monetary policy.”
A basis point is 0.01%, so a reduction of 25 basis points would be equal to a quarter percentage point.
Waller said he believes the Fed can use its power over interest rates to stave off further labor market weakening. “So, let’s get on with it,” he said.
Considered to be on President Donald Trump’s short list of potential replacements for Fed Chair Jerome Powell next year, Waller was one of two Fed governors to dissent from the July FOMC decision to hold the central bank’s benchmark interest rate steady in a range between 4.25%-4.5%. It was the first time multiple governors had opposed a committee rate decision in more than 30 years.

Since then, Waller said, the incoming data have only reinforced his belief that lower interest rates are necessary. He said he would still favor keeping the cut to a quarter point but, “That view, of course, could change if the employment report for August, due out a week from [Friday], points to a substantially weakening economy and inflation remains well contained.”

He added that he expects “additional cuts over the next three to six months” as the Fed remains as much as 1.5 percentage points above a neutral level.
When the jobs report is released, the BLS not only will update its counts from the previous two months but also will release a preview of its annual “benchmark” payroll revision. Waller said he anticipates the adjustment will show the economy created on average 60,000 fewer jobs a month than originally reported.
“That would mean that private-sector employment actually shrank, on average, in the past three months and that job creation earlier in the year was weaker than currently reported,” he said.
Following a lackluster July jobs report and sharp downward revisions from prior months, Trump fired the BLS commissioner and named conservative economist E.J. Antoni as the new chief. Waller, a Trump appointee from the president’s first term, said there’s nothing wrong with raising questions about the accuracy of BLS data considering the large revisions, but said the adjustments more likely are related to businesses being slow in returning their monthly surveys.
Waller added that he disagrees with a common assessment from other Fed officials lately that the labor market is “solid” because the unemployment rate is a relatively low 4.2%.
“I believe that any decline in labor supply is only masking weakening demand in the labor market. Whether or not supply is down, weakening demand is not good, and it is specifically what monetary policy is intended to address,” he said. More

Italy has been the stage of several highly mediatized banking takeover bids since the end of last year.
Summer has brought two of these ventures to an end amid shareholder opposition or government intervention.
Analysts say the merger momentum in Italy’s financial services sector has not necessarily been fully lost.

View of the branches of the Italian bank Monte deo Paschi in Rome.
Nurphoto | Nurphoto | Getty Images

By late spring, Italy’s banking world was swept up in a storm of convoluted takeover bids and counterbids involving a swathe of the country’s major lenders. Three months later, only one high-profile bid is still standing.
It started with UniCredit’s July decision to drop the “drag” of its nearly 15-billion-euro ($17.5-billion) bid for Banco BPM on the cusp of the proposal’s natural expiry, citing the opacity of conditions imposed by the Rome administration via its “golden power” screening rules. Then, Mediobanca’s shareholders this month voted against the lender’s roughly 7-billion-euro offer for Banca Generali, thwarting what was widely seen as a defensive play against state-backed Monte dei Paschi’s (MPS) interest in at least 35% of Mediobanca.

MPS has yet to give up.
Consolidation is one recourse for Europe’s cash-flush lenders to bulk up their scale and compete with Wall Street’s historically more lucrative banking giants. The M&A appetite has gripped Europe’s lenders at a time of markedly improved performance in the sector, with restructuring programs, the European defense boost, higher investment banking returns amid U.S. tariff-led volatility and an increase in broader M&A dealmaking in Southern Europe bolstering bottom lines.
In particular, the entangled web of offers from several of Italy’s key lenders — with pack leader Intesa Sanpaolo notably absent — builds on long-brewing momentum in what Fitch Ratings in April billed as a “more fragmented” banking system than in some other European nations.
“Increased scale could enable banks to better support large corporate investments, including those linked to European and Italian defence sector initiatives,” the agency said at the time.
Italy’s economy has been fertile ground for banking growth of late. It has “outperformed most of its Eurozone peers in recent years, although momentum may ease in coming years as an investment boom driven by [Next Generation EU] funds and construction spending fades away,” Deutsche Bank analysts said in an August report, stressing the country will need to pivot toward a more consumption-driven economy — facing the incoming pressures of higher U.S. tariffs.

The International Monetary Fund forecasts Italy — where it pronounced “further improvement in banking sector soundness” in a July report — will notch 0.5% economic growth this year, outpacing Germany’s projected 0.1% expansion over the same period.

M&A run still to go

While the pace of Italy’s consolidation attempts has simmered, analysts say we’re far from a denouement.
“Of late we have seen Banca BPER successful taking over Banca Sondrio, and Illimity Bank acquired by Banca Ifis. Meanwhile Monte dei Paschi is resolutely marching on Mediobanca, and Banco BPM’s independence might be short-lived, with Credit Agricole launching towards a 20% stake,” said Filippo Maria Alloatti, head of financials for credit at Federated Hermes Limited. “A merger between Credit Agricole Italy and Banco BPM seems likely in the medium-term.”
He added that the odds of MPS prevailing in its offer for Mediobanca are now higher — a view echoed by William Cain, head of M&A Research EMEA at Mergermarket, who told CNBC that “the vote on Banca Generali was effectively a referendum on Mediobanca’s standalone strategy and shareholders have now made their views clear on that point.”
He went on to say that, “There is an increasing chance BMPS will secure the 35% of Mediobanca’s share [that] capital management has previously said it would be happy with – and perhaps a lot more.”
Italy’s banks have also set sights beyond the country’s borders. UniCredit’s first play last year was to progressively accrue a synthetic stake of up to roughly 28% in German lender Commerzbank. The Italian bank has since converted this into a 26% equity shareholding in Commerzbank and has secured the European Central Bank’s blessing to hold up to 29.9% — stirring speculation over plans for a potential takeover, which Commerzbank and the Berlin administration have resisted.
The same UniCredit on Thursday said it has raised its holding in Greece’s Alpha Bank to nearly 26%, after engaging financial instruments for an additional 5% stake.

“What’s happening is not just an Italian story – Italy has become an important case study for the EU to test how M&A can evolve in the European banking sector,” Stefano Caselli, dean of the SDA Bocconi School of Management, told CNBC by email.
The consolidation fever has indeed spread beyond Italy. In July, Spain’s Banco Santander said it was buying British high street bank TSB for £2.65 billion from Sabadell. The Catalonian lender has itself been fighting off the advances of Spanish peer BBVA, which has decided to keep its takeover bid alive despite strict conditions from the Madrid government to clear the transaction.
The EU has challenged Spain over its intervention in the BBVA bid and has likewise found itself at odds with Rome over its use of the “golden powers” rules, which are typically invoked against transactions that threaten national security, in the UniCredit takeover. The European Commission has also posed questions over the Italian government’s November sale of a 15% stake in the bailed-out MPS, in which Rome retains a 11.73% shareholding. Italian Finance Minister Giancarlo Giorgetti has defended the “absolute correctness” of the stake exit, separately threatening to resign if he were overruled on the conditions Rome imposed on UniCredit, which included a timeline for the lender to halt its activities in Russia and a request to leave Banco BPM’s loan-to-deposit ratio unchanged for five years.
“The Italian Finance Ministry’s intervention was the final nail on the coffin for UniCredit’s 3rd takeover attempt at Banco BPM,” Alloatti pronounced.
In the case of the MPS bid, the SDA Bocconi School of Management’s Caselli argued that Rome “simply acted as a shareholder.”
“On the one hand, we expect the State to step in when a bank is in trouble. On the other hand, we want taxpayers not to lose money but ideally to see gains. At the same time, we want the State to play a neutral role,” Caselli said. “It’s difficult to achieve all of this at once.”

EU scrutiny

The EU, a proponent of lender consolidation, has launched the banking union supervision framework since the financial crisis, but is yet to complete the initiative.
“Hopes that the banking union would lead to closer integration of banking markets across Europe have not fully materialized,” Claudia Buch, chair of the supervisory board of the ECB, said in April. “Cross-border mergers have remained relatively rare, about 75% of banks’ lending portfolios are invested in their home markets, and few banks have truly European business models.”
Tie-ups have dwindled the number of EU banks since 2009, although roughly 4,752 were still operating in the European Union as of June, with 418 in Italy, according to Statista.
And the lack of blockbuster cross-border tie-ups is grinding some gears within the bloc.
“I feel frustrated because I continue to see domestic mergers with a domestic logic, not single-market mergers,” European Banking Authority Chairman Jose Manuel Campa told Politico earlier this week.   More

Affirm reported earnings per share of 20 cents for the quarter, almost double what analysts expected.
The company also reported better-than-expected revenue.

Affirm shares rose 15% in extended trading on Thursday after the provider of buy now, pay later loans reported better-than-expected earnings and revenue for the fiscal fourth quarter.
Here’s how the company did versus LSEG consensus estimates:

EPS: 20 cents vs. 11 cents estimated
Revenue: $876 million vs. $837 million estimated

Revenue climbed 33% in the period from $659 million in the same quarter a year earlier. Gross merchandise volume rose 43% to $10.4 billion from $7.2 billion a year ago.
Affirm reported net income of $69.2 million, or 20 cents a share, after recording a loss a year earlier of $45.1 million, or 14 cents a share.
 “This consistent execution led Affirm to achieve operating income profitability in FQ4’25 – right on the schedule we committed to a year ago,” the company said in its shareholder letter.
For the first quarter, Affirm said revenue will be between $855 million and $885 million, while gross merchandise volume will be $10.1 billion to 10.4 billion.
Shares of Affirm were up 31% this year before the after-hours pop, topping the Nasdaq’s 12% gain.

Affirm, which went public in 2021, faces growing competition in e-commerce. It has partnerships with Amazon and Shopify, but Walmart recently shifted to competitor Klarna, which is expected to go public in the near future. Last year, Affirm announced a deal with Apple.
WATCH: Affirm shares surge 14% as card adoption and merchant AI drive upside More

Fed Governor Lisa Cook’s lawsuit against Donald Trump challenges his ability to remove her from office but only briefly addresses the central accusations that she committed mortgage fraud.
Cook did call mortgage fraud accusations “unsubstantiated and unproven” without going into detail.
In a statement to CNBC, Federal Housing Finance Agency Director Bill Pulte noted that Cook did not attempt to refute the claims against her.

Lisa Cook, governor of the US Federal Reserve, speaks at the Peterson Institute For International Economics in Washington, DC, US, on Thursday, Oct. 6, 2022.
Ting Shen | Bloomberg | Getty Images

Federal Reserve Governor Lisa Cook’s lawsuit against Donald Trump challenges his ability to remove her from office, but only briefly addresses the central accusations that she committed mortgage fraud.
One part of the documents filed in the suit suggests that the issue at hand regarding documents Cook submitted for home loans may have been caused by a “clerical error” on her part and asserts that even if a mistake was made it does not rise to an offense that would justify removing her from office.

The complaint mostly focuses on rules outlined in the Federal Reserve Act that state Fed officials can only be removed for “cause,” a legally nebulous condition that may have to be determined by the Supreme Court.
Cook maintains that the fraud allegations do not meet the standard and instead are subterfuge for Trump’s efforts to stack the Fed Board of Governors in his favor so that he can get the interest rate cuts he has been demanding.
“It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her are pretextual,” the suit states. “This allegation about conduct that predates Governor Cook’s Senate confirmation has never been investigated, much less proven. This allegation is not grounds for removal under the” act.
The document calls the fraud allegation “unsubstantiated and unproven” but does not go into detail about why that is the case.
Whether Cook did in fact lie on the applications will be the focus of establishing the legal standard for cause to remove her.

Trump and other officials, most notably Bill Pulte, the director of the Federal Housing Finance Agency, have alleged that Cook provided false information about her primary residence when obtaining federally backed mortgages.
The complaint said that even if Cook did make a mistake on the applications, it still wouldn’t rise to cause.
“Even if the President had been more careful in obscuring his real justification for targeting Governor Cook, the President’s concocted basis for removal — the unsubstantiated and unproven allegation that Governor Cook ‘potentially’ erred in filling out a mortgage form prior to her Senate confirmation — does not amount to ’cause’ within the meaning of the FRA and is unsupported by caselaw,” stated the complaint from Cook’s attorney, Abbe Lowell.
Moreover, the suit says that “the President and Director Pulte have not even alleged explicitly that Ms. Cook benefited from any clerical error, or that such an error was intentional. Even if Governor Cook had committed the infractions that the President alleges— which she did not—the President would lack ’cause’ to remove her” under the law.
In a statement to CNBC, Pulte noted that Cook did not attempt to refute the claims against her.
“In her filing, Ms. Cook does not deny that these are her mortgage documents, so one has to wonder why she, or [Fed Chair] Jerome Powell, would want this to be a part of the Federal Reserve, which is supposed to have preeminent integrity and which is critical to the safety and soundness of the U.S. Mortgage Market,” Pulte said in a statement to CNBC’s Scott Wapner.
However, avoiding the specifics in this type of case is far from unusual as doing so would give credence to the allegation, said Robert Hockett, a professor of law and public finance at Cornell Law School.
“You don’t want to play his game, or legitimize his game by playing it,” Hockett said. “‘I’m not surprised at all that the lawsuit wouldn’t include paragraph after paragraph providing the details of her mortgage applications. Because, that would, in effect, be conceding that there’s something legitimate about what Trump is doing.”
Markets have been relatively unbothered by the battle between Cook and Trump, though that could change as the case escalates.
Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said markets are too focused on the conflict between the two and not enough on the bigger picture of what he calls the “Trumpification” of the Fed.
“We have no privileged knowledge of the legal facts, but believe if it were established Cook committed even accidental mortgage misrepresentation, she would have to go,” Guha said in a note earlier this week.
If Trump is successful in removing Cook, it would give him a 4-3 edge on the board in terms of appointees should Stephen Miran get through Senate confirmation to fill an empty seat. That could be extended to 5-2 if Powell chooses not to fill out his term as governor after his run as head of the central bank expires in May 2026. More

There are two ways, the world’s central bankers learned at this year’s Jackson Hole conference, to tame a horse. You can break the animal with fear, but it will never forget the pain. The kinder way, shown to attendees one evening, is to set consistent boundaries with gentle consequences (noisy clapping). This, says Martins Kazaks of the Bank of Latvia, is like central banking. Although you can raise interest rates to crush inflation, causing a recession, it is better when everyone believes in the inflation target, so nobody raises prices and wages too much in the first place. If the boundaries are credible, the bank can be gentler. More

Economists and financiers have compared stockmarkets to gambling since 1936, when Keynes warned of “the capital development of a country becom[ing] a by-product of the activities of a casino”. In 1999 Jack Bogle of Vanguard decried the “Wall Street casino” where only croupiers got rich, and in 2023 Warren Buffett wrote that “markets now exhibit far more casino-like behaviour than…when I was young”. More

Pity the bond trader without Truth Social on their phone. All it took was one after-dinner missive, fired off by the president on his social network, to turn the White House’s tussle with the Federal Reserve into something more worrying. On August 25th Donald Trump posted a letter saying he had fired Lisa Cook, a Fed governor, for alleged mortgage fraud. More