President Trump continued to chip away at the cherished norms / unsustainable illusions (we’ll let readers pick their own adventure) of the Unipolar Rules-Based Order this week, ramping up his ongoing attacks on Fed Independence, a pillar of post-Nixon Econ 101 textbooks. After months of subtle digs and less-subtle frontal assaults on Fed Chairman Jerome Powell, the President announced on Monday night that he had fired Lisa Cook from the Federal Reserve Board of Governors due to discrepancies in Cook’s personal mortgage history, potentially clearing the way for the White House to appoint a replacement that might be more accommodative to Trump’s low-rates agenda. This kicked off what we can only assume will be an extended battle of billable hours as Cook insisted Trump has no authority to remove her and promptly sued the administration, resulting in a court hearing that led to no clear answers as of this writing. Notwithstanding the details of Ms. Cook’s mortgage applications, the most noteworthy takeaway to us from this episode is that no one really seems to have any clear idea what the White House’s authority is here. Cook’s camp asserts that she can only be removed for cause, and Trump’s camp asserts in turn that they indeed have cause, but the definition and boundaries of that standard in the context of a so-called "unique, quasi-private entity” seem basically undetermined, which is not exactly the set of bright-line guardrails you’d hope to see for the world’s most powerful financial institution. But however the courts eventually rule, we think the outcome points in one direction. If the Fed is ultimately subordinate to the state, when push comes to shove it will make sure the government gets funded one way or another, and you may be well-served to consider the second-order effects for your wealth in that case. If, instead, the Fed is really just a private entity with some public window-dressing operated by a couple dozen lawyers and professors who can unilaterally and opaquely set the price of time without much meaningful oversight…well, let us respectfully submit that we think we can do better.

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