KBRA Financial Intelligence

Trump Admin May Transform Banking Outlook With Fed Board and CFPB in Limbo

Fed Shakeup Reaches Uncharted Territory

On August 25, President Trump addressed a letter to Federal Reserve Governor Lisa Cook, informing her that he intends to remove her from the central bank’s Board of Governors. Although a criminal referral related to alleged improprieties within “one or more mortgage agreements” signed by Cook in 2021—prior to her joining the Fed Board—is cited in President Trump’s letter, Cook has not been formally charged with any crime. The president maintains the ability to dismiss Fed governors “for cause,” as set forth in the Federal Reserve Act of 1913. However, that term is not explicitly defined and this power has never been invoked before, creating ambiguity about when such an action would be warranted.

Trump did threaten similar unprecedented action against Fed Chairman Jerome Powell several times earlier this year but ultimately settled on waiting out Powell’s term at the helm of the Fed Board, which expires relatively soon in May 2026. In contrast, Cook’s term as governor is set to run until 2038, making a protracted legal battle a more feasible course of action. If Trump’s attempted firing of Cook is ultimately successful, the president would have the opportunity to appoint at least three Fed governors before the end of his second term.

KBRA Financial Intelligence (KFI) has monitored the Trump White House’s increasing influence over the Fed’s seven-seat Board of Governors for several months. The president has already replaced one of the two vice chairs, will have the authority to replace the other in 2027, and is expected to choose a new chairman even earlier next year. Further, the August 8 resignation of former Governor Adriana Kugler would allow Trump nominee and Republican Stephen Miran to ascend to the board for the remainder of Kugler’s term (which runs until January 2026) if he can achieve confirmation from the senate. Miran, who is currently the Chairman of the President’s Council of Economic Advisers, received senate confirmation for that post less than six months ago by a simple majority of 53 votes.

Miran’s confirmation hearings with the Senate Banking Committee will begin on September 4, and his nomination could potentially advance to the full chamber as soon as this week. The duration between a Fed governor nominee’s initial hearing to confirmation has previously been as expedient as just eight days, leaving a narrow chance that Miran could participate in the upcoming Federal Open Market Committee (FOMC) gathering on September 16-17. If confirmed in time, Miran would not only be a voting member on the rate-setting committee, but he would also play a role in influencing the projected appropriate policy path for the next several years, as new Summary of Economic Projections (SEP) materials will be released for the first time since June.

Median expectations for inflation, GDP growth, and the fed funds rate among FOMC participants could be noticeably impacted by the inclusion of Miran’s outlook, as Trump has been a highly vocal proponent of significantly lower interest rates—advocating for a fed funds rate hundreds of basis points (bps) lower than the current level—and is likely to have screened potential appointees’ alignment with him on rate policy. Further, the inflationary implications of newly implemented tariffs on U.S. imports remain a critical uncertainty among policymakers, but Miran has espoused skepticism that the duties are a concern when it comes to prices. In an August 7 interview, the nominee claimed that “there’s just zero macroeconomically significant evidence of price pressures from tariffs.”

White House Now Embroiled in Cook Suit, CFPB Battle

Governor Cook’s most recently published economic outlook exhibits stark differences from Miran’s, noting in June that trade policy appears to be “increasing the likelihood of both higher inflation and labor market cooling,” and that the “current stance of monetary policy” was appropriate to handle a range of outcomes. Although Cook remains at her post as of now, her participation in September’s FOMC meeting will be conditional upon the timing and discretion of the U.S. judiciary.

Concerns related to personal financial disclosures have become fixtures of controversy and played a role in the voluntary resignation of numerous Fed officials throughout the years. This includes former Dallas Fed President Robert Kaplan’s 2021 retirement in the wake of public uproar regarding personal stock transactions amid the implementation of extraordinary market support measures by the Fed, but it appears unlikely that Cook will be willing to step down. Instead, the governor has filed suit against the Trump administration and the Fed, seeking an “emergency temporary restraining order” to halt any procedure that would formally end her tenure on the board. An initial hearing in Cook v. Trump et al. on Friday morning yielded no decision from U.S. District Court Judge Jia Cobb, who has asked both sides to submit more arguments for consideration. The Fed has stated that it will “abide by any court decision.”

As the White House faces off against Cook in court, it has picked up some legal momentum in recent weeks, notching a victory in an ongoing bout of litigation against several organizations headed by the National Treasury Employees Union, which is suing to block the laying off of more than 80% of the CFPB’s workforce. A panel of three DC circuit Court of Appeals judges issued a split decision in August, ruling that a lower court lacked the authority to block the mass job cuts, while allowing time for the plaintiffs to file appeals in other venues outside of the federal district court. The CPFB is one of the U.S.’s four major bank regulators, alongside the Fed, Office of the Comptroller of the Currency (OCC), and FDIC.

President Trump has previously said he would like to eliminate the CFPB, and Attorney General Pam Bondi said on August 15 that Department of Justice attorneys are pursuing an “effort to dismantle” the agency. The CFPB has been accused of being a duplicative and aggressive enforcer of consumer protection laws in recent years, igniting criticism from banking industry groups, which argued that financial regulation had become excessive. Along with spearheading the effort to slash staffing at the agency, Trump-appointed leadership at the CFPB is reportedly overseeing the closing out of thousands of open regulatory issues previously flagged for attention by agency bank examiners.

Some have suggested that the Trump administration is moving forward with mass layoffs at the CFPB, as well as more measured job cuts at the FDIC and OCC, in an effort to deregulate the banking industry. Whether or not this is the case, the composition of the Fed’s Board of Governors plays a significant role in bank regulation and supervision. Each governor votes not only on changes to the benchmark fed funds rate but also on proposed and final regulations, including the implementation of Dodd-Frank and the Consumer Protection Act, as well as a range of banking applications, enforcement actions, and other supervisory matters.

There have been 20 such Fed board votes so far in 2025, yet former Governor Kugler and Governor Barr were the only dissenters against any of these actions. The most notable was related to the advancement of a proposal meant to adjust the enhanced supplementary leverage ratio (eSLR), thereby slashing tier 1 capital requirements at the nation’s largest banks by 27%. Kugler has now departed from the Fed, and Barr, although remaining on the board, stepped down from his role as vice chair for supervision after the 2024 election.