Lisa Cook’s Firing From the Federal Reserve Would Ripple Into Real Estate

For months now, President Donald Trump has said he’s fed up.

The Federal Reserve has long held a tradition of independence in setting fiscal policy based on economic data and without political considerations. These principles are now on the verge of potentially getting turned on their head, with Trump poised to reshape the Fed to satisfy his desire for lower interest rates, adding to the increased uncertainty facing the commercial real estate market. 

The prospect of the White House’s increased influence over central bank policy has lingered since the early days of Trump’s second go-around as president and reached a fever pitch following a July report of Trump’s plan to fire Fed Chair Jerome Powell.

Trump’s efforts to reshape the Fed to his liking took another turn in late August when Bill Pulte, the president’s director of the Federal Housing Finance Agency, sought a criminal mortgage fraud case against Fed Governor Lisa Cook. Nearly a week after saying Cook should immediately resign, Trump posted a termination letter in an Aug. 25 Truth Social post that announced he’d fired the Fed governor, who President Biden appointed to a 14-year term that expires in 2038.

Cook, who is the first Black woman on the Fed board, said in a statement, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.” 

The market reaction to Cook’s firing was swift, with Dow futures, S&P 500 futures and Nasdaq 100 futures all plummeting. However, the market was largely unchanged by late morning after opening. 

“Trump’s decision to remove a sitting Fed governor has shaken confidence in the institution that underpins the world’s financial system,” Nigel Green, the CEO of deVere Group, said in a statement Tuesday. 

The Cook firing, which stems from Pulte accusing Cook of claiming two different Michigan homes as her main residence in 2021, will likely, ultimately, be decided by the federal courts. The symbolism of a sitting president seeking to axe someone on the central bank, however, could have lasting ripple effects for market players who count on the Fed to set fiscal policy without White House influence, particularly in CRE.  

While Trump later said a firing of Powell was “highly unlikely” following an immediate political and media firestorm, his repeated attacks on the Fed chair for not cutting interest rates have prompted concerns from some in the CRE industry. They’re concerned about future central bank decisions driving up inflation from pressures to lower interest rates. 

Powell did signal a potential forthcoming rate cut in remarks at the Fed’s annual retreat in Jackson Hole, Wyo., but he has kept borrowing levels higher for longer in an effort to fight inflation. 

With Powell’s second term set to expire in May 2026 and Trump’s open criticisms, attention has turned to who will be Powell’s likely replacement, with the White House examining 11 possible contenders for the top Fed post, according to CNBC. A number of those candidates have voiced varying degrees of support for lower interest rates over the past few weeks. 

Sam Chandan, the founding director of the Chen Institute for Global Real Estate Finance at New York University’s Stern School of Business, told CO executive pressure on the Fed “typically intensifies” near elections around interest rate policy. While institutional independence at the Fed is structurally protected through its governance setup, including a staggered board of governor terms, its practical autonomy going forward will be shaped largely by public posture from the central bank’s leadership, according to Chandan. 

“Even absent overt interference, if markets perceive that future appointees are responsive to short-term electoral priorities, confidence in the Fed’s inflation-targeting credibility could erode,” Chandan said. “If future leadership appears aligned with executive preferences — whether through prior affiliations or policy rhetoric — there’s a meaningful risk that monetary policy will be second-guessed by investors, complicating the Fed’s role as an anchor of macroeconomic stability.”

Pretty much every serious candidate for the chairmanship has indicated that they’re planning on making rate cuts.

One candidate, Rick Rieder, BlackRock’s chief investment officer for global fixed income, said in an Aug. 12 note to clients that there could be justification for slashing interest rates by 50 basis points in the upcoming September meeting, based on consumer price index data. 

Another potential Fed chair nominee with a Wall Street background, David Zervos, the chief market strategist at Jefferies, has sought cuts to the federal funds rate by half a percentage point over the last three meetings. 

Former Fed Governor Kevin Warsh, a third chair finalist, has repeatedly called for aggressively lowering interest rates this year. He told CNBC on July 17 that the central bank needs a “regime change” in the way it conducts policy, saying there is a “credibility deficit” with the current board.

Other candidates under consideration to replace Powell include Fed Vice Chair for Supervision, Michelle Bowman; Fed Governor Chris Waller; Fed Vice Chair Philip Jefferson; Dallas Fed President Lorie Logan; former St. Louis Fed President James Bullard; and Marc Sumerlin, a former economic advisor during President George W. Bush’s administration.

Whether the future Fed chair is a threat to independence from political influence is not black and white, with plenty of grayness, said Sairah Burki, the head of regulatory affairs and sustainability at the Commercial Real Estate Finance Council (CREFC), said.

“There is the dual mandate, which is always a little bit in conflict since they’re supposed to focus on unemployment and inflation, and certainly you could have a new chair with a different perspective in terms of what he or she thinks is more important to focus on,” Burki said. “Does that mean that they’re ceding ground to the administration? Not necessarily.” 

There might well be internal disagreement over any decision if it sacrifices inflation on the altar of rate cuts. Bowman and Waller both dissented during the Federal Open Market Committee’s (FOMC) 9-2 vote on July 30 to pause interest rates for a fifth straight meeting. It marked the first time in three decades that two governors had opposed a majority decision.  

However, even before Trump names his choice to succeed Powell, the 47th president is already crafting the Fed to his liking with the appointment of Stephen Miran to the Fed board of governors. Miran is the chair of the White House Council of Economic Advisers. 

Miran, who co-authored a paper for the Manhattan Institute last year arguing for increased presidential control of the Fed board, would, if confirmed by the U.S. senate, fill the remaining six months until Jan. 31, 2026 of Adriana Kugler’s term, after the Biden appointee resigned early. The Fed has traditionally staggered 14-year terms to maintain independence in its governance structure. 

Another wildcard that could further extend Trump’s reach with reshaping the Fed is whether Powell decides to stay on as governor until that term expires in January 2028 or step down once his chair role ends. If Powell decides to exit, it will grant Trump another opportunity to nominate a loyalist who shares his goal of lower interest rates. 

Burki noted that in addition to reshaping interest rate decisions, a newly constructed FOMC could also play a large role in crafting future regulation policies affecting CRE. She does not expect the Fed chair, however, to impact the central bank’s Basel III proposal to require the biggest banks to increase their capital requirements, which Bowman has been leaving in her role as vice chair for supervision. 

David McCarthy, the head of legislative affairs at CREFC, said it is unlikely any of the Fed chair candidates deviate from maintaining the FOMC’s independence, since doing so could jeopardize confirmation in the U.S. Senate, which Republicans narrowly control by a 53 to 47 margin. He stressed that independence of the Fed may potentially be altered given ongoing pressures from the White House to lower interest rates that have extended to governors in addition to the chair.

“If there’s going to be an increased pressure on other Fed governors on interest rates — whether it’s through the bully pulpit or something more — I think that does change the dynamic,” McCarthy said. “That independence might manifest in different ways, and it might be undercut or bolstered in different ways, too.” 

Trump has also used his political influence on the statistical agencies and placed an uncertain future on the trust of key economic data points relied on by CRE professionals for underwriting deals. Trump fired Dr. Erika McEntarfer as commissioner of the Bureau of Labor Statistics (BLS), claiming in an Aug. 1 social media post that the agency’s report that day was “rigged” to make him and Republicans “look bad.”

And Trump has been beating the drum that the Fed is politicized against Republicans for years; even before he was president the first time, he accused the Fed of keeping rates low to help President Obama.

Trump’s pick to replace McEntarfer, E.J. Antoni, the chief economist at the right-leaning Heritage Foundation, has proposed suspending the BLS’s monthly jobs report, citing unsubstantiated concerns about the data’s accuracy. 

Chandan said that the removal of McEntarfer, coupled with suggestions of reducing the frequency of key economic data reports, has “raised credible concerns” in the CRE industry, given the importance of these figures in an elevated interest rate climate with plenty of uncertainty impacting property valuations.

“Commercial real estate underwriting depends on timely, reliable macroeconomic data to calibrate assumptions around rent growth, absorption, cap rates and risk premia,” Chandan said. “Executive interventions that threaten the objectivity or availability of this data increase pricing uncertainty and make credit formation more fragile.”

The CRE capital markets are guided largely by confidence in “underlying signals” stemming from data in the labor markets, Chandan added. He said disruptions with labor and inflation data, even if temporary, can “impair risk modeling, complicate loan structuring and contribute to mispricing across asset classes.”

Jay Neveloff, a partner and chair of U.S. real estate at HSF Kramer, said that while independence at the Fed is important to many in the CRE industry, altering the central bank’s makeup is unlikely to move the needle in terms of impacting transaction activity. As long as future Fed appointees have strong financial credentials, it will instill confidence to the CRE markets no matter what decisions are made about interest rates or whether 2 percent inflation is an appropriate target goal, Neveloff said.

Neveloff added that an interruption of BLS economic data, such as the monthly jobs reports, would spark concerns from CRE professionals about gaining key information for deals, but would not likely deter transaction volume. 

“Anything that’s a change, especially if it affects data, will be perceived as an unsettling event by real estate and by every economic market,” Neveloff said. “Anything that interferes with independence is not going to be taken well, but I still believe at the end of the day, our economy is as strong as it’s been. And I believe this is an inflection point in the market, and I think it’s a really good time in the market to be putting money into it.” 

Andrew Coen can be reached at acoen@commercialobserver.com.