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    Federal Reserve cuts interest rates by a quarter point, for first time in nearly a year – as it happened

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    The Fed just announced an interest rate cut by a quarter point, which was largely anticipated amid a weakening labor market.This is the first time the Fed has cut rates since December 2024. Rates now stand at a range of 4% to 4.25%, the lowest since November 2022.Stay tuned for a press conference Fed chair Jerome Powell is expected to give at 2.30pm ET.The US Federal Reserve cut interest rates by a quarter point today, a move that will reverberate across the economy in the coming months. Fed chair Jerome Powell spoke at a closely watched press conference about the Fed’s decision.Here’s a summary of what happened this afternoon:

    The Fed cut interest rates by a quarter point, the first cut since December 2024. Rates are now at a range of 4% to 4.25%.

    Fed economists also released projections, which point to a majority expecting at least one more rate cut by the end of the year.

    During his press conference, Powell said the rate cut was a move toward “risk management” instead of a testament to the strength of the economy. Economists at the Fed are concerned about a weakening labor market, which could see higher layoffs if worsened.

    But Fed officials are still concerned about inflation. Powell said that prices are likely to continue going up toward the end of the year as companies pass along the price of tariffs to consumers.

    A question remains: Will tariff-related inflation be a one-time price increase, or will it be persistent? Powell said economists at the Fed expect it to be more of a one-time price increase but that the Fed’s just is to make sure it’s not persistent.

    With pressure from the labor market and prices, Powell described it as an “unusual” situation for the Fed to manage. “Our tools can’t do two things at once,” he said.

    Powell also took questions about the recent appointment of Fed governor Stephen Miran, who was confirmed by the Senate on Monday. Powell assured that the Fed’s independence is a priority to the entire committee that sets interest rates. And the Fed’s structure offers protection: For a single member to have outsized influence, they need to “make really strong arguments based on the data and one’s understanding of the economy… That’s in the DNA of the institution.”
    Powell responded to a question about comments new Fed governor Stephen Miran made at his confirmation hearing in front of the Senate earlier this week.Miran said that the Fed actually has a “third mandate”, which is to “moderate long-term interest rates”.The introduction of a third mandate is in opposition to how Powell has framed the Fed’s “dual mandate” – balancing unemployment and price increases.“We always think of it as the dual mandate,” Powell said, explaining that moderate interest rates come from stable inflation.“As far as I’m concerned, there’s no thought of … incorporating that in a different way,” he said.Markets appear to be relatively unresponsiveness to the Fed’s highly anticipated rate cut. Both the S&P and Nasdaq are both slightly down for the day, while the Dow is up.It’s a stark contrast to last week, when markets shot up at data that showed wholesale prices falling slightly in August, and consumer inflation being within expectations for the month.The overall picture that Powell has painted of the economy in his press conference isn’t necessarily one that’s thriving. Powell said that the economy has left the Fed in an “unusual” situation, and said that the Fed’s rate cut is more about “risk management” rather than an testament to a strong economy. The recent rate cut could cause inflation to rise, but risks of the job market worsening under current rates are higher.“We’ve seen much more challenging economic times from a policy standpoint, the standpoint of what we’re trying to accomplish, it’s challenging to know what to do,” Powell said. “There are no risk-free paths now.”Powell was, again, questioned about Stephen Miran’s role as both a new Fed governor and Trump’s chair to the Council of Economic Advisor.A reporter asked Powell how the Fed can be nonpolitical if one of its voting members is explicitly connected to politics. Powell emphasized that there are 12 voting members and 19 total participants on the board.“The only way for any voter to really move things around is to be incredibly persuasive, and the only way to do that in the context in which we work is to make really strong arguments based on the data and one’s understanding of the economy,” Powell said. “That’s really all that matters. … That’s in the DNA of the institution, that’s not going to change.”A Politico reporter asked Powell how Americans will be able to tell if the Fed, which has historically been nonpartisan, starts to be partisan.“We don’t frame these questions at all or see them in terms of political outcomes. In another part of Washington, everything is seen through the lens of does it help or hurt this political party, this politicians,” Powell said. “That’s the framework. People find it hard to believe that’s not at all the way we think about things at the Fed. We take a longer perspective, we’re trying to serve the American people as best as we can.”“I think you would be able to tell. I don’t think we’ll ever get to that place.”When asked about Fed governor Lisa Cook’s lawsuit against Donald Trump for her firing (a court reinstated her last week), Powell said: “I see it as a court case that I would see as inappropriate for me to comment on.”Powell said that Fed officials are expecting inflation from tariffs to be a one-time price level increase, though “we can’t just assume that, [and] or job is to make sure that’s what happens.”“We continue to expect it to move up,” Powell said of prices. “Maybe not as high as we would have expected it to.”He added that the case for “persistent inflation” is weaker.Which is why the Fed cut rates, what he described as a “neutral” policy, given that inflation isn’t out of control, but the labor market has slowed down.But Powell acknowledged that it’s “an unusual situation” – the Fed would most likely want to be more careful with rate cuts because of inflation, but has to be wary of the labor market.“Our tools can’t do two things at once,” he said.Powell is again describing the labor market as being in a “curious balance” – a term that he first used in his Jackson Hole speech last month.The labor market is balanced out, meaning that the supply of workers is on par with the demand that employers have for workers, but it’s not necessarily a sign of strength.Because of immigration, “the supply of workers is coming down”, Powell noted. “At the same time, demand for workers has come down quite sharply to the point where we see what I’ve called a ‘curious balance’.”“Typically, when we say things are in balance that sounds good,” he added. “But in this case, the balance is because both demand and supply have come down sharply, now demand is coming down more sharply because we now see the unemployment rate going up.”A reporter asked Jerome Powell about Stephen Miran’s appointment, specifically on the fact that Miran is the first Fed governor to also have a role in the executive branch while also serving on the Fed board. Miran is the chair of the Council of Economic Advisors.“The committee remains united in pursuing our dual mandate goals,” Powell said in response. “We’re strongly committed to maintaining our independence and beyond that, I really don’t have anything to share.”Fed chair Jerome Powell just started his press conference on the Fed’s rate cut decision.As outlined in the board’s statement, Powell said that the unemployment rate, while still generally low, has edged up.“Job gains have slowed and the downside risks to unemployment have risen,” he said.Powell pointed to new immigration policy as a major factor in the labor market slowdown.“A good part of the slowing likely reflects a decline in the growth of the labor force, due to lower immigration and lower labor force participation,” Powell said. “Even so, labor demand has softened and the recent pace of job creation appears to be running below the breakeven rate needed to hold the unemployment rate constant.”The median projection for the unemployment rate, which is currently at 4.3%, sees it rising to 4.5% by the end of the year.Powells also said higher tariffs have begun to push up some prices in some categories of goods, though the full impact have yet to be seen. Price increases due to tariffs could be a one-time price increase or it could lead to “persistent” inflation.“Our obligation is to ensure that a one-time price increase in the price level does not become an ongoing inflation problem,” he said.Much of this is what Powell said during his speech last month at the Fed’s symposium in Jackson Hole, during which he first suggested that the Fed was looking toward an interest rate cut.In economic projections released after the Fed’s rate-cute decision, members of the Fed’s board submitted their economic predictions for the economy over the next few years.A slight majority of board members seem to expect another rate cut by the end of the year, while a majority see more rate cuts in 2026. Board members are predicting a slight increase in unemployment, though they seem to think that inflation will largely cool in 2026 and 2027.It’s a more dovish take on the economy than how the Fed is describing the current economy in its board statement, where the Fed said that the labor market has slowed and inflation is going up – a dynamic that points to an economic condition known as stagflation.Before Fed chair Jerome Powell can expand on the Fed’s decision in his 2.30pm ET press conference, right now we just have the Fed’s statement on its rate cut to parse through why officials voted for a cut.Notably, the Fed’s rate-setting board took note of the jobs market.“Job gains have slowed, and the unemployment rate has edged up but remains low,” it said. It also noted that “inflation has moved up and remains somewhat elevated”.This is a change from the board’s last meeting in July, when it said that labor market conditions “remain solid”. And this is the first time the board has said inflation is going up.The statement also noted that Stephen Miran, Trump’s appointee to the board who was confirmed on Monday, was the only member of the board to vote against the rate cut. Miran wanted to lower rates by a half-point, instead of a quarter-point.The Fed just announced an interest rate cut by a quarter point, which was largely anticipated amid a weakening labor market.This is the first time the Fed has cut rates since December 2024. Rates now stand at a range of 4% to 4.25%, the lowest since November 2022.Stay tuned for a press conference Fed chair Jerome Powell is expected to give at 2.30pm ET.Inflation rose slightly in August as companies continued to push the cost of tariffs on to consumers.The newest update to the consumer price index (CPI), which measures a basket of goods and services, showed that prices increased 2.9% over the last year – the highest since January. Core CPI, which excludes energy and food costs, stayed stable at 3.1% after going up in July.Despite this slight uptick in inflation, Wall Street remains optimistic that the Federal Reserve will cut interest rates at the central bank’s board meeting next week. The Fed is under intense pressure from Donald Trump to cut rates, but the decision looks likely to be led by fears that the US jobs market is weakening.Investors are anticipating a quarter-point rate cut. Rates currently stand at a range of 4.25% to 5.5%.The Fed chair Jerome Powell indicated last month that the central bank was gearing up to cut interest rates for the first time this year.For months, policymakers defied public calls from Trump to lower rates – and brushed off his increasingly aggressive criticism of the Fed’s decision to hold them steady.“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in a closely scrutinized speech at the Jackson Hole symposium in Wyoming, highlighting a “challenging” dichotomy of risks: that Trump’s tariffs might increase inflation, while his immigration policies knock the US labor market.Concerning economic signs, including data indicating that the labor market has stalled while inflation picked up, have reinforced expectations that many policymakers will want to tread carefully in the months ahead.Trump has already suggested that he will be unhappy with the modest cut the Fed is widely expected to unveil later. Powell “MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND”, the US president wrote on his Truth Social platform early on Monday, claiming: “HOUSING WILL SOAR!!!”The Trump administration’s extraordinary bid to fire Lisa Cook, a Fed governor appointed by Biden, and remove her from the central bank’s board before this meeting, has so far failed.Late on Monday, a federal appeals court rejected Trump’s request to block Cook from attending the Fed’s latest rate-setting session, which started yesterday.The president cited unconfirmed allegations of mortgage fraud as he attempted to fire Cook, who has denied wrongdoing and argued Trump has no authority to fire her. Her term is not due to expire until 2038.No president has pursued such action – and moved to dismiss a governor at the Fed, which has long been independent from political interference – since the central bank’s founding in 1913.Trump has made no secret of his hopes to increase his oversight of the Fed, calling into question the future of its longstanding independence from political oversight by publicly describing plans to swiftly build “a majority” on its board.The Trump administration raced to strengthen its influence over the Fed ahead of this week’s meeting.Stephen Miran, a senior official who served as chair of the White House council of economic advisers, was confirmed by Senate Republicans as a Fed governor on Monday evening, and formally sworn in on Tuesday.His appointment marks the first time in the history of the modern Federal Reserve, which stretches back almost a century, that a sitting member of the executive branch will also work at the highest levels of the central bank.While Miran described the Fed’s independence as “critical” during a confirmation hearing earlier this month, and pledged to preserve it as governor, his decision to only take unpaid leave from his current job at the White House, rather than resign, raised questions over his ability to operate independently.The US Federal Reserve is expected to announce the first interest rate cut since December as a two-day policy meeting nears its end.The Fed started the meeting on Tuesday, hours after Donald Trump’s new appointee narrowly won confirmation to join the central bank – while Fed governor Lisa Cook continues to fight her removal by the president.Stephen Miran, the chair of Trump’s Council of Economic Advisers, took the oath of office as a Fed governor early on Tuesday after narrowly winning a Senate confirmation vote along party lines on Monday night.There is little doubt that the Fed will make its first interest rate cut of 2025 after the latest gathering, as policymakers pivot towards shoring up a deteriorating jobs market.But concerns about political influence targeting the independent central bank looms over the gathering, as Trump repeatedly bashes Fed Chair Jerome Powell over his rate decisions, and after he moved to fire governor Lisa Cook, sparking a legal battle.On Tuesday, Trump told reporters that the Fed should “listen to smart people like me”. 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      US treasury secretary reportedly made similar mortgage pledge to Lisa Cook

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      Scott Bessent, the US treasury secretary, previously agreed to occupy two different houses at the same time as his “principal residence”, Bloomberg News reported on Wednesday, an agreement similar to one Donald Trump has called mortgage fraud in his unprecedented bid to fire the Federal Reserve governor Lisa Cook.The Bloomberg report cites Bessent’s mortgages with lender Bank of America and his pledge in 2007 to primarily occupy homes in New York and Massachusetts.Mortgage experts told Bloomberg there was no sign of wrongdoing or proof of fraud in Bessent’s home-loan filings and said the issue highlights incongruities found in such documents.Bank of America did not rely on Bessent’s pledges and never expected him to occupy both homes as his primary residences, Bloomberg reported, citing the mortgage documents.“Nearly 20 years ago, Mr Bessent’s lawyers filled out paperwork properly, the bank has confirmed it was done properly, and this nonsensical article reaches the conclusion that this was all done properly,” Bessent’s lawyer Alex Spiro said in a statement.The Republican president, who appointed Bessent to the Treasury post, and members of his administration have accused Cook, an appointee of the Democratic former president Joe Biden, of committing mortgage fraud before taking office, a claim Cook denies.Congress included provisions in the 1913 law that created the Fed to shield the central bank from political interference. Under that law, Fed governors may be removed by a president only “for cause”, though the law does not define the term nor establish procedures for removal. No president has ever removed a Fed governor, and the law has never been tested in court. Trump has sought to remove her for cause, citing the alleged fraud.A US appeals court on Monday declined to allow Trump to fire her. The White House has said it will appeal the decision to the US supreme court. Trump’s justice department also has launched a criminal mortgage fraud inquiry into Cook, issuing grand jury subpoenas in Georgia and Michigan, Reuters previously reported.A loan estimate for an Atlanta home purchased by Cook showed that she had declared the property as a “vacation home”, according to a document reviewed by Reuters. The property tax authority in Ann Arbor, Michigan, also said Cook had not broken rules for tax breaks on a home there that had been declared her primary residence.Bloomberg in its report on Wednesday pointed to similar but not identical pledges made by an attorney on Bessent’s behalf on 20 September 2007, agreeing to make a Bedford Hills, New York, house his “principal residence” over the next year as well as another house in Provincetown, Massachusetts.“There are people who think that President Trump is putting undue pressure on the Fed. And there are people like President Trump and myself who think that if a Fed official committed mortgage fraud, that this should be examined, and that they shouldn’t be serving as one of the nation’s leading financial regulators,” Bessent told Fox Business Network in an interview on 27 August. More

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      Lisa Cook to remain at Federal Reserve while fighting Trump’s attempt to fire her, judge rules

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      A federal judge has ruled that Federal Reserve board member Lisa Cook can stay in her post while suing Donald Trump over his unprecedented bid to fire her.Cook is legally challenging the US president after he sought to remove her, citing unconfirmed allegations of mortgage fraud, amid an extraordinary campaign by his administration to strengthen its control over the US central bank.She asked US district judge Jia Cobb to impose a temporary restraining order against Trump’s attempt to “immediately” dismiss her, pending further litigation. The administration has argued that Trump is able to fire Fed governors “for cause” and appoint replacements.Trump has spent months attacking the Fed, where most policymakers – including Cook – have so far defied his calls for interest rate cuts. He has spoken of rapidly building “a majority” on the central bank’s board, calling into question the future of its longstanding independence from political oversight.Trump moved to fire Cook after one of his allies, Bill Pulte, whom he tapped to lead the US Federal Housing Finance Agency, alleged she had claimed two different properties as primary residences when obtaining mortgages in 2021.“How can this woman be in charge of interest rates if she is allegedly lying to help her own interest rates?” Pulte wrote on X. He referred the case to the Department of Justice for investigation.After Cook declined to resign, Trump tried to remove her from the Fed’s board. The justice department is now looking into the allegations of mortgage fraud.In a court filing, Cook’s attorneys insisted she “did not ever commit mortgage fraud” as they outlined their case.Multiple federal agencies were provided details of Cook’s mortgage arrangements when she was first nominated, by Joe Biden, to join the Fed’s board in 2022, according to her representatives. “The Government has long known about the alleged facial inconsistencies in Governor Cook’s financial documents,” the filing said.On one background check form, for example, Cook said that she had listed one property in Michigan as a primary residence and another in Georgia as a second home.On a separate questionnaire, she listed both homes as her “present” residence; the Michigan property as her “current permanent residence”; and a third property, in Massachusetts, as both a present residence, but also a second home and rental property, she said. More

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      Project 2025 and Donald Trump’s Dangerous Dismantling of the US Federal Government

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      Fair Observer Founder, CEO & Editor-in-Chief Atul Singh, or the Rajput, and retired CIA officer Glenn Carle, or the WASP, examine US President Donald Trump’s cuts to the US federal government. Their wide-ranging discussion blends sharp historical insight with ideological critique, seeking to make sense of today’s Volatile, Uncertain, Complex and Ambiguous (VUCA) world.

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      They emphasize that this topic has global resonance, since the world still depends on the stability and leadership of the United States. The discussion, therefore, becomes both an internal American debate and an international concern.

      Trump’s attack on federal agencies

      Atul and Glenn begin by cataloging specific Trump-era actions they view as evidence of a systematic weakening of the federal apparatus. These include the removal of officials such as Federal Reserve Governor Lisa Cook, Center for Disease Control and Prevention Director Susan Monarez and Internal Revenue Service Commissioner Billy Long. They argue that such moves, combined with a broader hollowing out of institutions like the Federal Reserve, the State Department, the CIA, US Agency for International Development and NASA, represent an intentional “gutting” of agencies crucial to governance and public welfare.

      Atul and Glenn insist that these institutions exist not only for technical governance but also for maintaining the credibility of the American democratic model. If the credibility of these institutions collapses, it erodes public trust and damages the US’s global standing.

      Norquist’s philosophy and Ronald Reagan’s agenda

      Glenn situates Trump’s efforts within a longer ideological arc. He traces them back to US President Ronald Reagan’s “revolution,” which reduced faith in government and elevated conservative economic philosophy. Reagan’s agenda, amplified by figures such as Americans for Tax Reform President Grover Norquist — who is famous for wanting to shrink government so small he could “drag it into the bathroom and drown it in the bathtub” — and bolstered by conservative think tanks, paved the way for what Glenn calls today’s “Trumpian revolution.”

      Atul adds that the Reagan years were not just an American turning point, but part of a broader global shift toward neoliberalism, deregulation and privatization. The ideological groundwork laid in that era, they contend, continues to shape political agendas today.

      Trump and Project 2025

      Central to the conversation is Project 2025, a Heritage Foundation initiative Atul and Glenn describe as a radical blueprint. Its goals include cutting the federal workforce by half and dramatically expanding presidential powers. They stress that these proposals would not only disrupt government efficiency and accountability but also tilt the balance of power sharply toward the executive branch.

      Atul and Glenn emphasize that the size of the workforce reflects the government’s ability to deliver services, regulate markets and provide stability in times of crisis. Reducing this by half would, in their view, leave the country dangerously exposed.

      Federal layoffs under Trump 2.0

      Atul and Glenn note that Trump’s current plans echo his first term, but with greater intensity. They state that proposals to eliminate 50% of the federal workforce are unprecedented in scope. They interpret these layoffs as more than cost-cutting; they are an ideological purge designed to weaken federal institutions and concentrate loyalty directly under presidential control. Such measures would ripple outward beyond Washington to ordinary citizens who depend on federal programs, grants and regulatory oversight for health, education and economic stability.

      Presidential control: a threat to US democracy?

      Glenn links Trump’s approach to the legal philosophy of Carl Schmitt, “[Adolf] Hitler’s legal theorist,” who defended the primacy of unchecked executive authority in Nazi Germany. Schmitt’s concept of the unitary executive resonates with Trump’s own political movement, Glenn argues, by undermining checks and balances and normalizing near-absolute presidential power. This strikes at the heart of democratic governance.

      Atul points out that the American system was designed around the separation of powers. If that foundation is eroded, the US risks losing what has long been its distinctive democratic safeguard.

      The Republican Party’s evolution

      The conversation also turns to the broader Republican Party. Atul and Glenn argue that decades of conservative activism, think tank influence and shifting party priorities have steered the Grand Old Party toward radical centralization of power. They suggest that what once seemed like outlandish ideas are now mainstream within the Republican platform, particularly under Trump’s leadership. This shift is both political and cultural, representing a redefinition of what conservatism means in the US.

      Fascism, strongmen and the future

      Atul and Glenn conclude with a sober warning: Left unchecked, the United States risks sliding from liberal democracy into what they call a “conservative autocracy.” They point to echoes of strongman politics and fascist ideology, stressing the long-term danger of normalizing authoritarian principles. At the same time, they note Trump’s diverse support base — including many immigrants who align with cultural conservatism and share a disdain for bureaucracy — as evidence that these dynamics are both complex and deeply embedded in American society.

      They highlight that this contradiction of immigrants supporting an anti-immigrant politician reveals how cultural and ideological affinities can often outweigh personal experience. The episode ends as a call to reflect on the fragility of democratic institutions and the vigilance required to protect them.

      [Lee Thompson-Kolar edited this piece.]

      The views expressed in this article/podcast are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      The ‘bizarre’ referral of the US housing finance agency chief to oust Lisa Cook

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      The head of the Federal Housing Finance Agency embraced a highly unusual process to accuse Lisa Cook, a Federal Reserve governor, of committing mortgage fraud, former officials and experts have said. One former high-ranking official called the director’s involvement in a criminal referral “bizarre”.William Pulte, a businessman and major GOP donor whom Donald Trump appointed to head the powerful housing agency earlier this year, has accused Cook of committing mortgage fraud by misrepresenting her homes as a primary residence, potentially securing more favorable mortgage rates. The justice department formally opened a criminal investigation into whether Cook committed fraud and has issued subpoenas related to the transaction. Cook’s lawyers have called the discrepancies a “clerical error” and she has denied any wrongdoing.Trump has used those accusations as the basis to try to fire Cook, who has strongly denied the allegations and is contesting her firing in court. Pulte has also made similar referrals against New York attorney general Letitia James and California senator Adam Schiff, both political rivals of Trump.Investigations into mortgage fraud are usually handled by the Federal Housing Finance Agency’s office of inspector general (OIG), an agency watchdog, staffed with lawyers and agents with an expertise in investigating crimes, including mortgage fraud. The OIG is then the office that typically makes a criminal referral.“It’s very bizarre for Pulte to be the one making a criminal referral himself and it’s not coming from the IG’s office,” said Janell Byrd-Chichester, a former chief of staff at FHFA. “If we thought there might be criminal activity, that would go to the IG for review and a determination and the IG would be making any referral, not the agency.”Three other former officials across the inspector general’s office and FHFA said Pulte’s involvement was unusual.After assuming his position earlier this year, Pulte started an FHFA hotline to report waste, fraud and abuse. The move seemed strange to some in the office of the inspector general, which already has its own hotline to report fraud, according to a person familiar with the matter.“It’s certainly unusual, if not unprecedented, for the director of FHFA to make a single request to the justice department that someone be investigated for alleged mortgage fraud,” said Guy Cecala, the executive chair of Inside Mortgage Finance, an information company and research firm that has covered the mortgage market for more than four decades. “Historically, we haven’t seen a lot of people prosecuted for mortgage fraud in terms of misrepresenting their occupancy on a house.”While the FHFA inspector general would take referrals from FHFA, their investigations were typically walled off from FHFA, former officials said. The separation helped protect the privacy of borrowers and their sensitive mortgage information. The inspector general’s office would typically only pursue cases that resulted in substantial losses to Fannie Mae and Freddie Mac, government-sponsored enterprises that are regulated by FHFA.The extent of the FHFA inspector general’s involvement in Cook’s mortgage is unclear. Also uncertain is whether Pulte requested that officials at Fannie Mae or Freddie Mac pull Cook’s loan documents – highly sensitive information – or whether the claims are based entirely on publicly available mortgage information. In Schiff’s case, the OIG appears to have at least requested documents about his home loans, according to the Los Angeles Times.“Your inquiry relates to public statements made by the Director of FHFA. I recommend that you reach out to FHFA’s media shop,” a spokesperson for the FHFA inspector general said in a statement. “FHFA OIG does not comment on the existence or non-existence of investigations conducted by this office.” FHFA did not return a request for comment.Pulte has refused to say why his agency started its inquiry into Cook. There is widespread belief that the decision was politically motivated because Trump wants to remove her from the Federal Reserve board in order to stack it with his appointees.Understanding the origins of Pulte’s inquiry is significant because misrepresenting occupancy on a mortgage application does not appear to be uncommon. Texas attorney general Ken Paxton, a Republican, and at least three members of Trump’s cabinet have listed multiple places as their primary residence, but have not faced the kind of scrutiny Cook has.“Issues with Cook’s loan file weren’t caught in some routine audit or the like. No one ever goes back and examines loan applications on performing loans for occupancy fraud; that would entail expenses for no benefit,” Adam Levitin, a law professor at Georgetown University, wrote in a post on the blog Credit Slips. “Instead, the only way anyone would have noticed a problem with Cook’s loan application is that Pulte, as head of FHFA, directed Fannie or Freddie to pull her application. That is unheard of.”Furthermore, Pulte had referred Cook for a criminal inquiry without presenting bona fide evidence of a crime.“If Cook broke her promise about property use (and that isn’t clear), all that shows is a breach of contract,” Levitin wrote in a separate blog post in August. “For it to be fraud, she would have to have never intended to perform the promise in the first place. Pulte has no evidence whatsoever about Cook’s intent at the time she took out the mortgage. He hasn’t even shown a breach of contract, much less common law fraud, not to speak of a federal criminal law violation.”Observers have said it was also unusual for a loan to attract scrutiny if it was being paid. “This case is unusual because I’m not aware of any actual loss that’s occurred. I’m assuming neither of these mortgages are in default. I’m assuming neither of the mortgages in question are underwater,” Cecala said.After the financial crisis, Fannie Mae and Freddie Mac began conducting random sampling on performing mortgages to see if there were issues that could put them at risk. But in cases where they found issues, it was rare that they would seek criminal punishment for the borrowers.“Normally in those cases – and again this is just precedent – Fannie and Freddie don’t get involved in the prosecution or even referring it to the justice department,” Cecala said. “They’ll just say, we see a problem with this mortgage and they just require the lender who made the loan to buy the loans back out of Fannie Mae and Freddie Mac securities.” More

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      Donald Trump maelstrom likely to leave US economic model unrecognisable | Heather Stewart

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      Donald Trump observed blithely last week that if his cherished tariff regime is struck down by the US supreme court, he may need to “unwind” some of the trade deals struck since he declared “liberation day” in April.It was a reminder, as if it were needed, that nothing about Trump’s economic policy is set in stone. Not only does the ageing president alter his demands on a whim, but it is unclear to what extent he has the power to make them stick.Yet even if the “reciprocal” tariffs first announced on 2 April are rolled back, they are only one aspect of a much wider assault on the last vestiges of what was once known as the “Washington consensus”.To name just a few of Trump’s recent interventions, he has taken a 10% government stake in the US tech company Intel, demanded 15% of the revenue of Nvidia’s chip sales to China and suggested the chief executive of Goldman Sachs should go.This at the same as taking a sledgehammer to Federal Reserve independence by lobbing insults at the chair, Jerome Powell, and trying to sack Lisa Cook from the central bank’s board.The head of the Bureau of Labor Statistics was removed by Trump after a run of poor jobs data; the chief of the National Labor Relations Board, Jennifer Abruzzo, was fired, too.The tech bros who back Trump loathe the NLRB for its role in upholding workers’ rights – mandating unionisation ballots at Amazon warehouses, for example.Trump’s approach is simultaneously systematic, in its determination to smash existing norms, and utterly chaotic. It is hard to categorise: corporate America is being unleashed – through the wilful destruction of environmental and labour standards, for example – and brought to heel.The leftwing senator Bernie Sanders welcomed Trump’s efforts to take a stake in Intel in exchange for government grants, for example – something he advocated in the Guardian back in 2022 – while some Republicans have condemned the approach as (heaven forbid) “socialism”.Partly because it coincides with the AI-fuelled stock boom that has propelled the value of tech companies into the stratosphere, the market response to this torching of the status quo has so far been modest.Whatever emerges from another three and a half years of this maelstrom is likely to be unrecognisable as the US economic model of recent decades.Its destruction has not happened overnight. The days were already long gone when the US, as the world’s undisputed economic superpower, could export free market, financialised capitalism worldwide.After the 2008 crash, the conditions for which were created in Wall Street boardrooms, any moral or practical claim the US had to offer an economic example to other nations evaporated.As the turmoil rippled out through the global economy, and the US government responded by bailing out large chunks of its financial sector, the lie of laissez-faire was laid bare.The crisis exposed the risks of turbocharged capitalism to countries outside the US, too – not least in the former Soviet bloc – that had been advised to adopt the model wholesale.As Ivan Krastev and Stephen Holmes put it in their compelling polemic The Light that Failed, “confidence that the political economy of the west was a model for the future of mankind had been linked to the belief that western elites knew what they were doing. Suddenly it was obvious that they didn’t.”skip past newsletter promotionafter newsletter promotionBack home in the US, meanwhile – as in the UK – the perception that banks had been bailed out, while the galaxy brains behind the crisis got off scot-free, sowed the seeds of a corrosive sense of injustice.Similarly, even before the crash, the idea that ever-expanding free trade brings economic benefits was bumping up against the fact that even if that is true in aggregate, for workers across the US rust belt, just as in the UK’s former manufacturing heartlands, it brought deindustrialisation and unemployment.This was fertile ground for Trump’s populist economic message. His first-term China tariffs were, with hindsight, a relatively modest stab at, as he saw it, tilting the playing field back towards the US.Joe Biden did not unwind those tariffs, which went with the grain of geopolitics, as any hopes that economic liberalisation would bring China into the fold of democracies were sadly dashed, and President Xi’s regime took on an increasingly authoritarian bent.Biden also took a muscular approach to the state’s role in the economy, with the billions in grants and loans distributed under the Inflation Reduction Act linked to national priorities of cutting carbon emissions and creating jobs.So the idea that before Trump arrived on the scene, free market US capitalism was motoring along unchallenged is misleading, but the pace at which he is crushing its remaining norms is extraordinary.There is ample ground for legitimate disagreement here: taxpayer stakes in strategic companies are much more common in European economies, for example. Trump may be laying down tracks that future US governments with different priorities could follow.Given that it is so unclear even what kind of economy he is groping towards, the overriding sense for the moment is of radical uncertainty. Friday’s weak US payrolls data, with the unemployment rate close to a four-year high, suggested companies may be responding with caution.Investors appear to have decided to avert their eyes for now, buoyed up by the prospect of Fed rate cuts, and the mega returns of the tech companies. However, with every chaotic week that passes, the risks must increase – and as the UK has learned in the wake of the Liz Truss debacle, economic credibility is quicker to lose than to rebuild. More

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      US justice department reportedly opens criminal inquiry into Fed governor Lisa Cook

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      The US justice department has initiated a criminal investigation into mortgage fraud claims against Federal Reserve governor Lisa Cook, according to new reports, as a lawsuit she filed against Donald Trump over her firing makes its way through court.Lawyers with the justice department have issued subpoenas for the investigation, according to the Wall Street Journal.Last month, Trump moved to fire Cook over unconfirmed claims that she listed two properties as her primary residence. Bill Pulte, the director of the Federal Housing and Finance Agency and a close ally of Trump, alleged Cook had lied on bank documents and records to obtain a better mortgage rate.Cook, a voting member of the Fed board that sets interest rates, said she has “no intention of being bullied to step down” and that she would “take any questions about my financial history seriously”.In response to Trump’s bid to dismiss her, Cook filed a lawsuit against the president arguing that her removal was unconstitutional and threatened the independence of the Fed. Cook’s lawyers say the firing was “unprecedented and illegal” and that federal law requires showing “cause” for a Fed governor’s removal.“An unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not [cause],” her lawyers said in court documents.In court documents, lawyers for Cook suggested that a “clerical error” may be behind the discrepancies found in her mortgage records.Cook was appointed by Joe Biden in 2022 for a 14-year term on the board that was set to end in 2038. She is the first Black woman to be appointed to the board.US district court judge Jia Cobb heard arguments for the lawsuit last week and said she will expedite the case, which is ultimately expected to be taken up by the US supreme court.Trump’s attacks against Cook come against the backdrop of a long fight the White House has waged against the Fed, which has historically been treated as nonpartisan.skip past newsletter promotionafter newsletter promotionEarlier in the year, Trump threatened to fire the Fed chair, Jerome Powell, for not lowering interest rates, but ultimately walked back his threats after negative responses from investors. Trump also tried to accuse Powell of fraud over renovations at the Fed’s headquarters, which have cost more than anticipated.Abbe Lowell, Cook’s lawyer, told the Journal that “it takes nothing for this DoJ to undertake a new politicized investigation”. The justice department did not immediately respond to the Guardian’s request for comment.This is the third mortgage fraud inquiry the justice department has launched against Democrats and Democratic-appointed officials. Experts have called the pattern a type of “lawfare” as Trump and his allies use their roles to take down other officials.Last month, the US attorney general, Pam Bondi, appointed a special attorney to investigate similar mortgage fraud allegations the White House has levied against California senator Adam Schiff and the New York attorney general, Letitia James. More

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      ‘Racist as hell’: Trump’s cabinet is almost all white, and he keeps firing Black officials

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      A day after Donald Trump announced that he was firing Lisa Cook, the first Black woman to serve on the board of governors of the Federal Reserve, the White House proudly released a photo. It showed Trump, his cabinet and other officials giving a thumbs-up. Of the 24 people in the Oval Office, only one was Black.For those who have studied the US president’s long and troubling history of racism, the two events were more than mere coincidence. They were indicative of a man who has recently brought white nationalist perspectives from the margins back to the mainstream.Trump has vehemently denied that he is a racist, pointing to a modest increase in support among African American voters in last year’s election, when his opponent was a Black woman. But critics suggest that his effort to oust Cook fits a pattern of purging diverse voices from the higher ranks of leadership.“He chose to fire her out of all the governors because she’s a Black woman,” said LaTosha Brown, co-founder of the organisation Black Voters Matter. “His goal is to get control of the Federal Reserve and for that to no longer be an autonomous, independent body. But what he does recognise is that in America everything is about race. It is as lethal as a nuclear bomb.”Cook taught economics and international relations at Michigan State University, and was previously on the faculty of Harvard University’s Kennedy School of Government. She was a Marshall scholar who received degrees from Oxford University and Spelman College, a historically Black women’s college in Atlanta.Cook dedicated much of her scholarship to examining how racial discrimination and targeted violence created barriers to economic advancement for African Americans. She also advised the Nigerian and Rwandan governments on banking reforms and economic development.In 2022 she was confirmed to the Fed’s board of governors by the Senate in a party-line vote. Republicans argued that she was unqualified and found her research overly focused on race; Democrats brushed off such critiques as unfounded.On Monday, Trump said he fired Cook after the director of a housing regulatory agency, whom the president appointed, alleged that she committed mortgage fraud. She refused to resign and filed a lawsuit claiming that Trump has no power to remove her from office.Trump’s order aligned with his effort to expand his power across once independent parts of the federal government and broader economy and culture. It also marked another potential high-profile removal of a Black leader from the federal government amid Trump’s broader crusade against diversity and inclusion policies.Brown observed: “He knows that racism and sexism is a very effective tool to cast doubt and that’s the pathway. Lisa Cook isn’t even the chair of the board. So why would you pick her?“He picked her because he is betting that, in an industry that is probably 90% or more white male, his odds of removing her are greater than the odds for removing others from the board. That in itself is rooted in the history and how insidious racism is built into the fabric of how we see people of colour in this country.”Over the past seven months Trump has targeted other prominent Black leaders. He fired Gen Charles Q Brown Jr, chair of the joint chiefs of staff, the second Black man to serve in the position. Brown had delivered speeches about racial discrimination and issued policies that promoted diversity, equity and inclusion (DEI) programmes in the military.The president dismissed Carla Hayden, the first Black person to serve as librarian of Congress, after a conservative advocacy organisation accused her of being a “radical”. He ousted Gwynne Wilcox, the first Black woman to sit on the National Labor Relations Board, which hears private-sector labour disputes.View image in fullscreenTrump’s critics argue that his life and career have given succour to white supremacists. In 1973 he and his father were sued for housing discrimination in New York; in 1989 he took out full-page ads in several newspapers calling for the death penalty for the Central Park Five, Black and Latino youths who were later exonerated.Trump broke through in national politics with the “birther” conspiracy theory, falsely claiming that Barack Obama was not born in the US and therefore ineligible to be president. After a 2017 white supremacist rally in Charlottesville, Virginia, Trump said there were “very fine people on both sides”.He has reportedly described Haiti and African nations as “shithole countries”, has called Covid-19 the “Chinese virus” and “kung flu”, and, on the campaign trail last year, said immigrants were “poisoning the blood of our country”, echoing the rhetoric of Adolf Hitler.Since returning to the White House, Trump has imposed a travel ban on many of the world’s poorest countries even as the US granted refugee status to about 50 white South Africans, claiming they were victims of racial persecution and “white genocide”.He issued executive orders to curb DEI initiatives in the federal government and even sought to blame DEI for an air crash. He is seeking to purge “divisive, race-centered ideology” from Smithsonian Institution museums, suggesting that there is too much focus on “how bad Slavery was”.The attempt to fire Cook is the most dubious move yet, prompting an outcry from Democrats and civil rights groups, who pointed to her gender and race as vital factors.skip past newsletter promotionafter newsletter promotionCongresswoman Nanette Barragán of California posted on the X social media platform: “If you haven’t noticed yet – this is a disturbing pattern for Trump. Fire or drive out smart, competent women, in particular women of color, from high ranking positions and fill many of these positions with white men.”Derrick Johnson, president and chief executive of the National Association for the Advancement of Colored People (NAACP), said: “Dr Cook’s credentials outshine Trump’s entire cabinet. This president simply cannot stomach Black excellence when it reveals his failures, particularly those in positions of power. In reality, this is about bending the Federal Reserve to Trump’s will, and he’s using racism as a tool to do it.”But Trump’s actions are being cheered on by white nationalists. Far-right groups such as the Oath Keepers and Proud Boys have been quoted as saying that they no longer need to take to the streets to demonstrate because the president has so comprehensively adopted their talking points and embraced their agenda.Antjuan Seawright, a Democratic strategist, observed: “When you have white supremacists who are holding key roles in government and you have leaders in this country who come and play footsie to their drumbeat they don’t have to resist because what they want is laid out for them in the form of a buffet.”Trump has been quick to point to Black allies when politically expedient, such as Tim Scott, the South Carolina senator, the representative Byron Donalds of Florida and Alveda King, a niece of the civil rights leader Martin Luther King. But critics note there is no guarantee this will translate to policies that address racial injustice.Nor has it manifested in significant representation at the heart of government. Towards the end of the first Trump presidency, the Washington Post identified 59 people who had held cabinet positions or served in top White House jobs. Only seven were people of colour and only one – the housing secretary, Ben Carson – was Black.In his second term, Trump has picked only one Black person to serve in his cabinet: Scott Turner, the secretary of housing and urban development. Joe Biden, by contrast, appointed the most diverse cabinet in history with more women and people of colour than any that had come before.Seawright said: “We went from generational progress to generational rollback, and what this president and this administration has done in seven months could take 70 years at least to replenish. It should be a friendly reminder for all people, but particularly African Americans, that all progress is not permanent.”Trump’s cabinet includes Pete Hegseth, a former Fox News host with no experience of running a major organisation, at the Pentagon; Robert F Kennedy Jr, a vaccine sceptic, at the health department; and Linda McMahon, a former professional wrestling executive, at the education department. The White House deputy chief of staff, Stephen Miller, has associated with white nationalist thinkers and groups and is the architect of his hardline immigration policy.Rashad Robinson, a civil rights leader and former president of the group Color of Change, added: “We live in a very diverse country, a country with many different types of people that come from many different backgrounds, and the president exhibits his values by who he puts in office.“This is not simply that Donald Trump has put only one Black person in his cabinet. It’s that Donald Trump has gone out of his way to find some of the most unqualified and ill-equipped people to put in those jobs as a way to actually avoid having to put Black people in his cabinet.”For Brown, the voting rights activist, Trump’s cabinet picks demonstrate that he is “as racist as hell”. She added: “Quite frankly, I’m glad he doesn’t have a whole lot of Black people in his cabinet because that would be deeply embarrassing to me. Who would work in that mess?” More

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      The Guardian view on Trump and the Fed: independence is no substitute for accountability | Editorial

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      Donald Trump’s attempt to sack the Federal Reserve governor, Lisa Cook, is the familiar authoritarian trick of bending institutions to serve the leader’s immediate ends. The widespread condemnation is deserved. This is not some daring experiment in popular control of monetary policy. Yet what should follow censure is reflection. For the furore over Ms Cook has revealed a peculiar reflex: to defend the Fed’s independence as though it were synonymous with democracy itself.But is independence of the Fed, or central banks generally, really that? Eric Levitz at Vox thinks so, or at least that it is close enough. He argues that Congress sets the Fed’s objectives; independence applies only to the means. Without independence, politicians would be free to game rates for votes – as Richard Nixon did in 1972, leaning on the Fed to juice growth before the election. On this view, independence is not anti-democratic but prudent delegation.The historian Adam Tooze says that argument misses the point. The Fed, he says, is not a neutral technocracy: its regional boards give business elites formal seats at the table, while labour and consumers are marginal or absent. Independence is not independence from politics; it is independence from electoral accountability. To defend this arrangement as democracy’s bulwark, Prof Tooze maintains, is to confuse professional consensus with popular legitimacy.The leftwing economist Michael Roberts goes further. In his blog this week he argues that central bank independence was never really about technocratic efficiency at all. It blossomed in the neoliberal era because it suited finance. He notes that the 1980s and 90s saw a sharp rise in central bank independence while inflation fell. The correlation has been taken as proof of causation. Yet Mr Roberts argues that the decline in prices owed more to slowing global growth and the end of one-off supply shocks.Central banks proved no better than anyone else at forecasting crises: the former Fed chair Alan Greenspan admitted the 2008 crash left him in “a state of shocked disbelief”. Turkey’s recent bout of hyperinflation was blamed on presidential meddling – but Mr Roberts suggests the real culprits were trade deficits, political instability and a collapsing lira. Monetary policy is too blunt an instrument, as many commentators concede, to deal with today’s volatile world. So where does this leave informed opinion? Certainly not with Mr Trump. To replace one form of unaccountability with a demagogic strongman is no gain. The real task is to ask what a democratic politics of central banking would look like.The academic Saule Omarova’s People’s Ledger is one radical answer: treat the Fed as a public utility, offering universal bank accounts and explicitly aligning its balance sheet with public priorities. A National Investment Authority could channel long-term finance towards infrastructure and decarbonisation, rather than leaving investment decisions to Wall Street. Efforts could be made to broaden board representation beyond business, require distributional impact assessments and tighten “for cause” clauses so that presidents cannot hound governors from office on flimsy pretexts.Mr Trump’s assault must be denounced – and Ms Cook defended. But if voters stop there, a deeper lesson will be missed. Central bank independence was never democracy incarnate. At best it was a compromise suited to an earlier era. Today’s challenge is to rebuild monetary authority on firmer, more democratic ground.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More