Can the president remove a Fed governor?

Speaker 1 Are you looking to invest in municipal bonds? For extra protection, buy bonds insured by Assured Guarantee. It guarantees 100% of your principal and interest will be paid when due.

Speaker 1 Assured Guarantee has demonstrated its reliability and financial strength for nearly four decades. That's why the bonds they back are one of the safest investments you can make.

Speaker 1 Visit AssuredGuarantee.com. Assured Guarantee, a stronger bond.

Speaker 2 This podcast is supported by Odoo. Some say Odo business management software is like fertilizer for businesses because the simple, efficient software promotes growth.

Speaker 2 Others say Odoo is like a magic beanstalk because it scales with you and is magically affordable.

Speaker 2 And some describe Odoo's programs for manufacturing, accounting, and more as building blocks for creating a custom software suite. So Odoo is fertilizer, magic beanstock building blocks for business.

Speaker 2 Odoo, exactly what businesses need. Sign up at odoo.com.
That's odoo.com.

Speaker 4 The question hanging over the economy, and not for the first time, is: can the president do that?

Speaker 4 From American Public Media, this is Marketplace.

Speaker 4 In Denver, I'm Amy Scott in Perkai Rizdahl. It is Tuesday, August 26th.
Good to have you with us.

Speaker 4 We're going to start today with the unfolding story of President Trump's attempts to fire Federal Reserve Governor Lisa Cook.

Speaker 4 In a letter late yesterday, Trump said he would remove Cook ostensibly over unproven allegations of mortgage fraud.

Speaker 4 The bigger context, of course, is that the president has been trying to influence the Fed's makeup for months in order to push the central bank to lower interest rates.

Speaker 4 Governor Cook is planning to file a lawsuit to prevent what her lawyer calls an illegal action by the president.

Speaker 4 But if Trump is successful in removing Cook, it might actually achieve the opposite of what he wants. Marketplace's Sabri Beneshore explains.

Speaker 3 If, and it is a big if, the president's attempted firing goes through, it could open the door to more presidential influence at the Fed.

Speaker 7 In the longer term, the issue is whether the Fed is able to act independent of executive influence.

Speaker 3 Matthew Penati is a senior analyst at Capital Advisors Group.

Speaker 7 Because if they can't, that has very significant macroeconomic implications, in my view.

Speaker 3 If people believe the Fed is influenced by a president more than by inflation data, the less faith they have that inflation will be managed well.

Speaker 9 That sends a signal to the bond market that there's more risk of inflation going forward.

Speaker 3 Kathy Jones is with the Charles Schwab Center for Financial Research. Inflation is an investment killer.

Speaker 9 Investors want to be compensated for tying up their money for longer periods of time because there's always some risk that inflation will erode those returns.

Speaker 3 So when investors are more worried about inflation, they charge more. They charge higher interest rates in the bond market, which the Fed does not directly control.

Speaker 3 It only directly controls short-term interest rates. The market controls long-term rates that affect everything from car loans to mortgages to a lot of government debt.

Speaker 9 That's the irony of this whole battle, I think, is that the more the president pushes on the Fed to cut interest rates, the more risk there is that long-term rates go up.

Speaker 3 It is also possible that concerns over inflation and Fed independence are just peanuts, that this whole brouhaha is ignoring an even bigger risk to long-term interest rates.

Speaker 10 The main issue is just the budget deficit.

Speaker 3 Gershon Distenfeld is director of income strategies at Alliance Bernstein.

Speaker 3 He says the government is getting in over its head when it comes to debt, and investors will charge higher long-term rates because of that. Either way, markets have not panicked just yet.

Speaker 9 And I think it's because you've had decades of Fed credibility that have kept the market believing that Fed independence is still there.

Speaker 3 Marvin Lowe is with State Street Markets. Investors are waiting, like everyone else, to see how this all plays out.
In New York, I'm Sabri Benishore for Marketplace.

Speaker 4 On Wall Street today, well, Sabri said, it's all about the bond market. We'll have details when we do the numbers.

Speaker 4 Okay, Sabri was just talking about how intervention at the Fed could lead to higher, not lower, interest rates.

Speaker 4 Well, that's just one consequence of the president's move to fire a member of the Federal Reserve's Board of Governors.

Speaker 4 Meddling with the Fed and its independence could have ripple effects throughout the economy for years to come. Here to help us break it all down is Sarah Binder.

Speaker 4 She's a senior fellow at the Brookings Institution and a professor of political science at George Washington University. Thanks for being here.

Speaker 12 Sure. Thanks for having me.

Speaker 4 So, what is the president's authority here? Can he just remove a Fed governor?

Speaker 12 Well, the Federal Reserve Act gives the president some power, but limited power to remove governors from the board in Washington, right?

Speaker 12 He can't just eliminate them but take them off because he disagrees with their policy views.

Speaker 12 Why is that? Because the lawmakers put into the act what we call for-cause protection. That is, the president has to have a quote-unquote cause to remove a governor.

Speaker 12 Now, the courts and Congress have never been very, very specific about what counts as cause.

Speaker 12 But

Speaker 12 we've got terms from various court cases, inefficiency, neglect of duty, malfeasance.

Speaker 12 But generally, generally the case is the president could remove a governor if they could make the case that the basically that the governor has failed to faithfully fulfill their duties.

Speaker 12 But that's not just policy differences.

Speaker 4 Yeah, so the president says he has cause. I should say no charges have been filed, but he has made allegations of mortgage fraud.

Speaker 4 What should the process be like if allegations like this come up?

Speaker 12 Well, generally speaking, and granted, we don't have a specific precedent here for going after and trying to remove a governor for cause, But generally speaking, the president in the White House would make a documented case.

Speaker 12 It would at least have that fight go out in the courts. That is a hearing, a chance for the accused to make a presentation to defend themselves.

Speaker 12 And then, upon the making of a case for cause,

Speaker 12 either the governor would accept it or it would be litigated in the courts and the courts would issue an order making that decision. And of course, none of that has happened here.

Speaker 4 Right. Governor Cook is expected to file a lawsuit challenging her attempted firing.
I'm assuming this gets tied up in the courts for a while.

Speaker 4 But if Trump is successful, you know, what are the longer-term implications for the economy?

Speaker 12 Well,

Speaker 12 if Trump is successful, what he's looking for is to remake the Board of Governors in his image, that is, with loyalists who will reliably lower and deliver lower interest rates.

Speaker 12 The danger here is twofold. First, the president might not stop with the board.
He might also want to try, it's a little harder, but try to remake who the presidents are of the 12 Reserve Banks.

Speaker 12 Second, what's the impact here? The worry,

Speaker 12 the danger, if there is one, is that the Fed could continually lower rates, keep rates very low, regardless of what the economy calls for.

Speaker 12 And keep in mind, Congress gives the Fed two goals, not just low inflation, it also gives them a robust jobs market.

Speaker 12 So the issue here, broadly speaking, the public, markets, businesses, households, you and me, right? The public has to trust that the Fed is doing the right thing.

Speaker 12 It is not making politicized or partisan decisions about the cost of credit.

Speaker 12 And that's what's at risk here were a president to remake the board solely with governors who want to serve the president's interests.

Speaker 4 And what about the global implications

Speaker 4 for brand America and how people abroad view the U.S. government and its role in the economy?

Speaker 12 Well, the Fed is really the preeminent macroeconomic policymaker in the world. And it anchors, right? We have the dollar as the reserve currency.

Speaker 12 In times of crisis, other countries and other central banks turn to the Fed for assistance and loans via their swap lines.

Speaker 12 So there's a lot at stake here, not just for the cost of credit in the U.S., but

Speaker 12 how the U.S. can basically position itself globally as a lender and supporter of strong

Speaker 12 economics around the country.

Speaker 4 Sarah Bender is at Brookings and George Washington University. Thank you so much.

Speaker 12 Sure. Thanks for having me.

Speaker 4 Now, to the housing market, where the relatively high interest rates the president wants to come down have been weighing on sales for a few years now.

Speaker 4 Even so, home prices rose across the country by nearly 2% in June compared to the year before. That's according to the latest reading of what's now called the SP Cotality Case-Schiller Index.

Speaker 4 But that increase is less than the rate of inflation over the same period, which is new. And as Marketplace's Nova Safo reports, it's a pretty straightforward story of supply and demand.

Speaker 15 On the demand side of the housing price equation, the geography is shifting. Nick Godek is with SP Dow Jones Indices, which puts out the Kay Schiller report.

Speaker 16 Certain markets that really were favored during the pandemic years, markets like Tampa and Phoenix, are starting to really pull back.

Speaker 15 Home prices in Tampa are down the most by nearly 2.5%

Speaker 15 year over year. They They rose the most in New York City, up 7%,

Speaker 15 Chicago, up 6%.

Speaker 16 Return to office mandates, that could be partly what's at play with increased interest in more traditional industrial centers.

Speaker 15 On the supply side, 66% of home builders are discounting to move inventory, according to their National Trade Association. Stephen Cates is at bank rate.

Speaker 18 You look at the places where there have been a lot of building, Florida, Texas, the Carolinas, other parts in the South, they've done in a massive amount of growth in terms of new housing, apartments, a variety of different things, and demand is cooling there.

Speaker 15 Meanwhile, homeowners who are waiting for mortgage rates to come down before putting their homes up for sale are starting to accept reality.

Speaker 15 Inventory, new homes, existing homes on the market, is up by a third year to date, according to Realtor.com.

Speaker 15 All of this adds up to some amount of opportunity for buyers, says Nancy van den Houten at Oxford Economics.

Speaker 10 There's a little bit more room for home prices to weaken further. Buyers have a bit more leverage than they've had in some time.

Speaker 15 But that's if you can afford to buy it all, because home prices are still up by about 30%

Speaker 15 compared to five years ago. I'm Nova Safo, Four Marketplace.

Speaker 4 Elsewhere in the macroeconomy, demand for some of the things you find in your house, like washers and dryers, also tractors, computers, and power tools.

Speaker 4 So-called durable goods orders fell last month, according to the Census Bureau, down nearly 3% in July from the month before.

Speaker 4 But orders of core capital goods, which is a measure of business investment in equipment, actually increased by about 1%,

Speaker 4 better than expected. Marketplace's Elizabeth Troval has a closer look.

Speaker 19 When I ask Professor Zach Rogers what to make of today's durable goods data, he says says it's like taking a class.

Speaker 20 It's really difficult to understand how you're doing when you don't know how you're being graded.

Speaker 19 Just like his new students at University of Colorado, importers need to know what the expectations are to succeed.

Speaker 20 Right now, the syllabus is changing every couple weeks for importers, and so it's difficult to know how well they're doing.

Speaker 19 Or whether we should take this durable goods data to the bank.

Speaker 20 The general upshot on this is cautious optimism.

Speaker 19 Tom Goldsby with the University of Tennessee, Knoxville, says part of what's complicating the data is that businesses have been making orders far in advance, trying to get ahead of tariffs.

Speaker 21 We're operating on top such a period of incredibly inflated numbers already, given the tariff-induced front in loading of inventories.

Speaker 19 There is potential for distortion with lots of yo-yoing with import orders, says Hitendra Shaturvedi with Arizona State University.

Speaker 22 Even though the order books have gone up and and down following the tariff regime, the shipment numbers of the goods companies have actually shipped out have been steady.

Speaker 19 And there's plenty of sector-level trends to keep in mind, says Jason Miller with Michigan State University. Consider the build out of data centers.

Speaker 24 That includes computers and electronic products and components, as well as electrical equipment. And so those sectors are doing fairly well.

Speaker 19 While other sectors, he says, like agricultural equipment, are weaker. I'm Elizabeth Troval for Marketplace.

Speaker 4 Coming up.

Speaker 21 Being greedy, then they lost their independent critical thinking.

Speaker 4 The tale of a fallen real estate empire. But first, let's do the numbers.

Speaker 4 The Dow Jones industrial average rose 135 points, 3 tenths percent, to finish at 45,418. The NASDAQ added 94 points, just over 4 tenths percent, to close at 21,544.

Speaker 4 And the SP 500 found 26 points, 4 tenths percent, to end at 6,465.

Speaker 4 The president's move to force out Fed Governor Lisa Cook helped send gold to a two-week high. The precious metal added seven-tenths percent.

Speaker 4 It also gave a boost to the Euro, which gained almost two-tenths percent against the dollar. Bonds rose.
The yield on the 10-year T-note fell to 4.26%.

Speaker 4 You're listening to Marketplace.

Speaker 8 This podcast is brought to you by Wise, the app for international people using money around the globe.

Speaker 8 With Wise, you can send, spend, and receive up to 40 currencies with only a few simple taps and save up to 55% compared to major banks.

Speaker 8 Whether you're buying souvenirs with pesos in Puerto Vallarta or sending Euros to a loved one in Paris, you know you're getting a fair exchange rate with no extra markups.

Speaker 8 That's what makes Wise the fast, affordable way to use your money around the globe.

Speaker 8 WISE offers 24/7 live support and runs over 7 million daily checks to catch and prevent fraud, so you know your money is where it's supposed to be.

Speaker 8 Be smart, join the 15 million customers who choose WISE. Download the WISE WISE app today or visit Wise.com.
Learn more by visiting Wise.com/slash US slash compare. T's and C's apply.

Speaker 11 This marketplace podcast is supported by Wealth Enhancement, who understand that dreams don't happen by chance, it takes a plan.

Speaker 11 They're ready to build your wealth blueprint for retirement, investing, taxes, and everything else your financial life brings.

Speaker 11 It reveals gaps and highlights opportunities you may have missed at no cost to to you. Find out more at wealthenhancement.com/slash blueprint.

Speaker 11 This Marketplace podcast is supported by Justin Wine. Get the celebration ready with Justin Wine.

Speaker 11 Since 1981, Justin has been producing world-class Bordeaux-style wines from Paso Robles on California's Central Coast.

Speaker 11 Justin offers curated gift sets, library wines, magnums, and even custom-etched bottles. Visit justinwine.com and enter Market 20 for 20% off your order.

Speaker 11 Justin offers the perfect holiday gifts for clients, colleagues, friends, or family. Be sure to check them out at justinwine.com to receive 20% off your order for a limited time.

Speaker 17 This episode is brought to you by Intuit QuickBooks. In business, cash flow isn't just a number.
It's the heartbeat of your operation. And when it's out of sync, everything slows down.

Speaker 17 QuickBooks Money Tools helps you transform your cash flow and your business with one powerful platform. You can get paid faster, pay bills smarter, and secure funding when the opportunity knocks.

Speaker 17 QuickBooks Money Management Tools gives you real-time insight into your finances so you know where your money stands and where it's headed.

Speaker 17 No more manual entry, no more chasing invoices, just clarity, confidence, and control. Visit quickbooks.com/slash money.
Again, that's quickbooks.com/slash money. Terms apply.

Speaker 17 Money movement services are provided by Intuit Payments Inc., licensed as a money transmitter by the New York State Department of Financial Services.

Speaker 4 This is Marketplace. I'm Amy Scott.
This Friday marks the 20th anniversary of the day Hurricane Katrina made landfall in Louisiana.

Speaker 4 More than 1,800 people lost their lives due to the flooding and the slow federal emergency response.

Speaker 4 20 years later, FEMA, the federal emergency management agency, is in the news again over the Trump administration's cuts to the agency, including its efforts to eliminate a program called Building Resilient Infrastructure in Communities, or BRIC, which provides grants to help state, local, and tribal governments reduce their risk from disasters.

Speaker 4 The program's fate is still up in the air, pending legal challenges. Sarah McTarnahan with the Urban Institute has studied the program.
Thanks for joining us.

Speaker 14 Thanks very much.

Speaker 4 So I gave a quick summary of this Building Resilient Infrastructure and Communities program. But how does it work and how does it show up in communities?

Speaker 14 So most people are familiar with FEMA based on what they do after a disaster. BRIC is one of the ways that FEMA supports communities before disasters.

Speaker 14 BRIC funds can help them do things like build emergency evacuation shelters, upgrade their utility grids, projects that are really proven to not only reduce the risk of flood, fire, storms, but also to protect property, people, and communities as they face these hazards.

Speaker 4 And BRIC, I understand, isn't the only hazard mitigation program that's facing cuts. What else is it? Risk?

Speaker 14 Actually, most of our hazard mitigation comes post-disaster through something called the Hazard Mitigation Grant Program, or HMGP. FEMA loves its acronyms.

Speaker 4 And interestingly,

Speaker 14 that program is also a bit missing in action in 2025. HMGP grants are made through the presidential disaster declaration process.

Speaker 14 And so far this year, President Trump has not been accepting the governor's requests for HMGP. We have a lot in the pipeline pending decisions and some that have been flat out declined.

Speaker 4 Right. I just saw that in Maryland, for example.

Speaker 14 Exactly. And HMGP actually represents like in the Gulf Coast, 75% of hazard mitigation spending.

Speaker 14 So there's been no announcement of them being formally canceled, but they have not been been getting approved.

Speaker 4 The Gulf Coast is especially vulnerable to climate disasters.

Speaker 4 Urban, in another paper, found that since Katrina, every county has experienced at least three federally declared disasters, and some 10 or more.

Speaker 4 How have these programs helped communities? Do we know that they've paid off in more resilience?

Speaker 14 It's a great question. So the basic recovery programs have been absolutely essential for bringing basic services back on board, helping people rebuild their homes and businesses.

Speaker 14 The mitigation programs, like BRIC, we kind of understand their value through a slightly different lens. These programs are designed to avoid future losses.

Speaker 14 It's estimated that for every $1 invested in mitigation,

Speaker 14 between $6 and $13

Speaker 14 are benefited, depending on the different estimates that have been out there.

Speaker 14 And I think what we see looking at the Gulf Coast is kind of a missed opportunity to have done more of this type of an investment.

Speaker 14 We looked at how climate change will impact future losses in the Gulf Coast, and they're projected to double by mid-century.

Speaker 14 But that doesn't factor in what we could protect and avoid in terms of losses through mitigation programs.

Speaker 4 Why do you think the return on investment, you know, speaking in

Speaker 4 dollars and cents,

Speaker 4 is so good on this program?

Speaker 4 I mean, it seems like it's more expensive to rebuild than to prevent disaster in the first place, right?

Speaker 14 Aaron Ross Powell, what I would say is that communities, especially across the Gulf, are not experiencing this once in a decade. It's an every other year reality for many places.

Speaker 14 You're avoiding losses not just for one event, but for the many that will face.

Speaker 14 But also, it delivers kind of important social and business level benefits that should be considered as well. Every time a disaster impacts kind of

Speaker 14 ability to go to school, go to work, shop locally, it has economic effects on the community. The longer they take to get back online after a disaster, the more the losses start to compound.

Speaker 4 These cuts or attempted cuts are part of the Trump administration's goal of shrinking the federal government, shifting more responsibility for disasters to state and local governments.

Speaker 4 You know, if BRIC goes away, can local communities pick up the slack?

Speaker 14 It's a question everyone is asking, and I think the answer is a little bit nuanced.

Speaker 14 There are a few states that have already had similar programs, and there's the potential that private investment could step in and take an interest in some of these programs.

Speaker 14 But historically, you know, we haven't seen those sources funding at the level of the need that's demonstrated.

Speaker 14 Places like Louisiana, thinking about the anniversary of Hurricane Katrina, that sit, you know, on the Gulf Coast at very high risk for flooding and other storm events, but have just overall low fiscal capacity as a state.

Speaker 14 And so the question of where the money is going to come from is really challenging.

Speaker 14 BRIC, in particular, due to its pre-disaster timing, has been a really unique and kind of one-of-a-kind resource for communities to get ahead of the damages and losses that they're experiencing.

Speaker 4 All right, Sarah McTarnahan is a principal research associate at the Urban Institute. Thanks so much for your time.

Speaker 14 Thanks very much, Amy.

Speaker 4 Next month, Kai and I are hosting a conversation about the economy and climate change. More info is at marketplace.org/slash climate.

Speaker 4 This may seem like ancient history, but you might remember four years ago, global investors were worried about a Lehman Brothers-style financial collapse starting in China.

Speaker 4 One of that country's biggest developers at the time, called Evergrand, defaulted on its debt with liabilities worth more than $300 billion.

Speaker 4 No such collapse happened, although Evergrand has been ordered to liquidate. This week, the company marked another milestone, the delisting of its shares in Hong Kong.

Speaker 4 Marketplace's Jennifer Pack reports.

Speaker 25 Evergrand started in 1996, when the golden era of China's real estate market was getting underway, says financial writer Chen Xi.

Speaker 26 Evergrand Evergrand seized the moment when China was urbanizing and had explosive demand for housing.

Speaker 25 But Evergrande's success, he says, was based on a vicious cycle.

Speaker 26 Evergrand kept expanding by using newly borrowed money to pay off old debts.

Speaker 26 The survival of the business hinged on housing prices rising forever and that there is always liquidity in the market.

Speaker 25 Other developers followed suit. At its peak, real estate accounted for 20 to 25 percent of China's GDP.

Speaker 25 Not many people said, hang on a minute, because speculative home buyers, investors, and overseas bondholders were all making money, says Deloitte's Asia-Pacific contingency planning and insolvency leader Glenn Ho.

Speaker 23 Being greedy, then they lost their independent, critical thinking.

Speaker 25 Everyone sobered up in 2021 when housing sales slowed and Beijing capped borrowing capacity. Evergrand couldn't pay, not suppliers, creditors, or staff, leading to protests.

Speaker 25 Developers also abandoned construction of pre-sold homes. Yan Yuejing is with the Real Estate Research Institute e-House in Shanghai.

Speaker 6 There was a lot of panic in the market a couple years ago because of the unfinished homes and funding home prices.

Speaker 25 So, why wasn't there a Lehman moment? Well, local governments across the country contained the fallout by completing millions of homes themselves.

Speaker 25 Though property prices, says Yan Yue Jing, are another thing.

Speaker 6 From its peak in 2021 till now, housing prices have dropped by 35%.

Speaker 25 This makes Chinese homeowners feel poorer. They spend less.
And that affects both the Chinese and global economy. Because if Chinese consumption is sluggish at home, companies are going abroad.

Speaker 25 It's causing trade tensions. The U.S.
and Europe accuse Chinese firms of dumping their excess stock. As for Evergrande, its debt is so big, restructuring doesn't seem possible, says Ho.

Speaker 23 The golden era is gone.

Speaker 25 Gone are the days when property values only went up, he says. People should learn that prices can also come down.
In Shanghai, I'm Jennifer Pack for Marketplace.

Speaker 4 This final note on the way out today, even the rich are worried about tariffs.

Speaker 4 The CEO of Italian car maker Lamborghini told CNBC that some would-be customers are holding off on buying to see where U.S. tariffs on European imports land.

Speaker 4 With the price of a Lamborghini starting at $400,000, it adds up.

Speaker 4 Jordan Manji, Zonil Maharaj, Janet Wynne, Olga Oxman, Virginia K. Smith, and Tony Wagner are the digital team.
I'm Amy Scott. We will see you tomorrow.

Speaker 4 This is APM.

Speaker 6 And now, a next level moment from AT ⁇ T Business. Say you've sent out a gigantic shipment of pillows and they need need to be there in time for International Sleep Day.

Speaker 6 You've got AT ⁇ T 5G, so you're fully confident.

Speaker 5 But the vendor isn't responding, and International Sleep Day is tomorrow.

Speaker 6 Luckily, AT ⁇ T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT ⁇ T 5G requires a compatible plan and device.

Speaker 6 Coverage not available everywhere. Learn more at ATT.com slash 5G network.