Last night, in a letter posted to social media, President Trump tried to deliver on his threat to fire Federal Reserve governor Lisa Cook on trumped-up charges of mortgage fraud.

Except that Trump doesn’t have the authority to fire a sitting governor with a term appointment, and Cook made clear that she is not going anywhere. The Supreme Court, in Trump v. Wilcox, recently indicated that it considers Fed appointees as sacrosanct, unlike other independent agencies where the Court held that a president can replace even term appointees.

This is of course ludicrous: As Georgetown Law’s Josh Chafetz explains, the Roberts Court’s extreme effort to split the baby by claiming that Federal Reserve appointees hold some special status that independent appointees of the National Labor Relations Board and other agencies don’t is “transparent bullshit designed to simultaneously serve the conservative legal movement’s interest in deregulation via the ‘unitary executive’ and corporate interests in not crashing the economy.”

More from Robert Kuttner

Trump is barred from firing Lisa Cook not because the Supreme Court said so but because he doesn’t have a cause for firing. The alleged mortgage fraud is not proven in any way. As Adam Levitin explains, FHFA director Bill Pulte’s mere letter of criminal referral is not a judicial order, and people can have more than one “principal” residence. The entire episode makes a mockery of due process, and reveals Pulte as a dangerous regime functionary rooting through the mortgage applications of a preselected enemies list.

Yet we are where we are. And now Chief Justice Roberts will be forced to choose between his constant deference to Trump and the safeguarding of a depoliticized economy.

So what now?

Trump’s ploy is part of his long-standing clumsy scheme to take over America’s central bank. He has repeatedly tried to pressure Fed chair Jay Powell into resigning, because he’s furious with Powell’s refusal to cut interest rates. Powell has also made clear that he will serve out his term, which goes until next May. Meanwhile, Powell is doing his best to ignore Trump and conduct a sensible monetary policy in tricky circumstances.

With employment softening and the inflationary impact of Trump’s tariffs not yet biting, Powell elegantly explained the balancing act that he faces, in a farewell address to the annual Fed conference at Jackson Hole, Wyoming, last week. Here was Powell’s key observation: “Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”

In other words, the economy is markedly slowing. So despite the Fed’s inflation phobia, the balance of risks has shifted from rising prices to rising unemployment, and Powell has set the stage for a rate cut in September.

This policy shift is not the result of Trump’s petulant threats. It’s the result of Trump’s perverse policies, including his war on immigrants, who are afraid to come to work; his tariffs and threatened tariffs, which wreak havoc with supply chains; and his scrapping of industrial policies in favor of seizing stakes in major companies without consideration of whether the actions will benefit the economy as a whole.

If Trump is misinformed on Fed appointment policy, he is also misinformed on how the Fed conducts monetary policy. The Fed has seven governors. There are now two Trump soft-money allies on the board of governors. Trump will get a third one, assuming that the Senate confirms Trump’s appointee Stephen Miran to fill out the term of Adriana Kugler, who resigned a few months early. (Miran would have to be reappointed next January.) So in Trump’s thinking, if he can push out Lisa Cook, he gets a 4-3 majority on the Board of Governors, even before Powell’s term ends next May.

However, the seven governors do not make monetary policy. That’s the work of the 12-member Federal Open Market Committee, which includes all governors plus a rotating cast of regional Fed bank presidents. And those regional presidents have staggered terms, are appointed by local boards, and tend to be institutionalists. So under any scenario, Trump control over monetary policy is years away.

But Trump’s ploy can still do damage. Powell, like other Fed chairs, has carefully operated by consensus. The last time the Fed failed to operate by consensus was in the final days of Paul Volcker’s chairmanship in the late 1980s, when Volcker lost a working majority (mainly over regulatory policy) and was not reappointed. This spooked markets.

A fragmented Fed will make a shaky economy worse, especially as the Fed will have to grapple with not only monetary policy but regulatory issues such as crypto’s infection of the banking system. In the meantime, Lisa Cook’s term doesn’t expire until 2038.

Maybe the most shocking thing about this whole episode is that markets are currently shrugging it off and are basically flat. The loss of economic democracy happens bit by bit and then all at once. We should heed the warning signs.

As a postscript, a word on mortgage fraud: We spent about a decade around the turn of the last century ignoring an epidemic in mortgage fraud that caused a financial collapse, but only when that mortgage fraud was perpetrated by banks. Indeed, one of the largest—and that’s a relative term—mortgage fraud prosecutions in recent years was by the Obama administration against one of the Real Housewives of New Jersey, for the crime of false mortgage applications. You see, when people lie to banks, they go to jail, but when banks lie to people, they get a bailout.