The Atlantic

09/22/2025

President Donald Trump could be close to taking over the Federal Reserve. On September 9, a federal district judge blocked Trump’s effort to remove Lisa Cook as a Federal Reserve governor; on Thursday, the administration petitioned the Supreme Court to allow the firing to go through. If the high court ends up siding with the administration, then Trump will have a clear path to filling the central bank with loyalists willing to vote the way he directs them to.

So far, most of the hand-wringing over this possibility has centered on Trump’s desire to dramatically cut interest rates, which could juice the economy and improve the GOP’s political prospects in the short term, but make inflation worse and destroy the Fed’s credibility in the long term.

But the Fed has far more power than just setting rates; in fact, setting rates is the least of what it can do. The central bank determines the supply of money flowing through the economy, decides which institutions can have access to the financial system, and can print and spend money at will. If Trump takes control of the Fed, he will have attained extraordinary power to reward his friends and destroy his enemies.

As part of the 2010 Dodd-Frank financial-reform act, Congress imposed a few restrictions, but these turned out to be vague and easily gamable. “There are really no limits to this power,” Aaron Klein, a senior fellow at the Brookings Institution and former Treasury official who helped draft the relevant provisions of Dodd-Frank, told me. “The Fed can basically lend however much it wants, to whoever it wants, whenever it wants.”

Perhaps Trump would instruct his Fed appointees to exercise that power with restraint, lending only as needed to guide the economy through truly perilous circumstances. But little would stop him from instead treating the bank’s lending power as a bottomless slush fund. He could direct money to favored industries, such as crypto, or even his own businesses. He could reward media outlets that give him favorable coverage, companies that donate to Republican campaigns, and even the budgets of local officials who promote his agenda. If Democrats in Congress shut down the government to limit funds for ICE, say, he could send hundreds of billions of dollars to private contractors to keep operations moving. “It’s an infinite money pit,” Lev Menand, a professor at Columbia Law School who previously worked for the Federal Reserve Bank of New York, told me. “There’s really nothing to stop the administration from lending trillions of dollars to the president’s priorities.”

Perhaps even more alarming, control of the Fed would give the president a powerful weapon for punishing his enemies. The Fed is the central node of the U.S. financial system. Every major bank in the country holds a master checking account at the Fed, which they depend on to make and receive payments, manage their reserves, and access credit. The central bank, in turn, operates as the country’s main financial regulator: It determines whether banks are in compliance with existing laws on financial risk management and illicit transactions, for example, and has various ways to enforce that compliance, ultimately backed by the threat of cutting off access to the financial system altogether.