The White House announced on Friday a presidential memorandum establishing an investigative committee to examine whether Federal Reserve Governor Lisa D. Cook made false statements in one or more mortgage documents. The memorandum is dated October 7 and was released on Friday. The committee is required to report to the President on whether there are grounds for removal under Section 242 of the Federal Reserve Act and the Supreme Court's interpretation in Trump v. Cook.

The committee consists of three members: President's Economic Policy Advisor and National Economic Council Director Kevin Hassett; Equal Employment Opportunity Commission Chair Andrea Lucas; and Labor Secretary and Acting Director of the Office of Government Ethics Keith Sonderling. The committee may consult with personnel from executive departments, including the Department of Justice. A closed-door hearing will be held at the White House on November 5, lasting no more than four hours, during which Cook may submit a written statement in advance and another after the hearing, based on which the committee will make recommendations to the President.

This is the latest procedure in Trump's over-a-year-long attempt to remove Cook. The New York Times reported that the mortgage allegations were raised over a year ago, and Cook has not faced any criminal charges. Her lawyers Abbe Lowell and Norm Eisen stated on Friday that there are serious questions about the legality of this hearing; if the process is objective, the conclusion should be that she did not commit mortgage fraud, and thus there are no grounds for removal. The two have contacted the White House to assess whether this is a substantive procedure or merely a checkbox step. Cook has expressed her willingness to present facts and clarify her name.

The Supreme Court temporarily blocked the executive branch from directly removing Cook in June of this year. Analysts suggest that this committee and hearing are intended to fulfill the procedural requirements pointed out in that ruling. The hearing is scheduled for November 5, two days after the elections that will determine control of Congress. If Cook is removed, there will be a vacancy on the seven-member board, and the nominee must be confirmed by the Senate. Kevin Warsh was appointed in May to succeed Jerome Powell as chair.

The Federal Reserve raised the policy interest rate by 25 basis points to about 3.9% during its meeting on September 15-16, marking the first rate hike in three years. The meeting minutes indicated that officials unanimously believe inflation remains high, with limited progress toward the 2% target. CNN reported that all 12 voting members, including Warsh, voted for the rate hike. The next meeting is scheduled for October 28-29, with futures pricing indicating that the market expects no change this time, with a hike in December. Trump has publicly advocated for rate cuts and stated after the September hike that Warsh should not have allowed it.

This is not a trading directive but a procedural action regarding board seats and interest rate paths. Buyers are pricing the November hearing and October meeting separately, while sellers are under pressure as the removal has not yet occurred and the allegations have not entered criminal prosecution. The event is driven by the memorandum released on Friday, not economic data. Beneficiaries are those hoping to reshape the board's composition through the vacancy created by presidential appointments; those under pressure are the policy committee still operating under the unanimous rate hike path from September, as the hearing date falls after the meeting and after the elections, preventing a direct change to the October vote.

The memorandum calls for a report on grounds for removal, not an immediate removal. Cook's status as a governor has not been revoked by this document prior to the hearing.

Source: Public Information