Better Markets’ The Month in Review – October 2021

Dennis Kelleher, Co-founder, President, and CEO, Better Markets – At it again!

The scandal engulfing the Federal Reserve is only getting worse. That’s because, for 51 days now the Fed has been engaged in a cover up and has refused to come clean with the American people about the senior Fed officials who traded during the pandemic for personal profit, while hundreds of thousands of Americans were dying and tens of millions thrown out of work.

Definitive proof of that cover up was revealed last week by New York Times reporter Jeanna Smialek: she reported that on March 23, 2020, that a Federal Reserve ethics officer warned senior Fed officials in writing (1) that the Fed’s policies were applicable and prohibited trading and (2) that they shouldn’t trade for “at least the next several months.” (Remember that the Fed began propping up every financial market and impacting the price of every financial product is late February, pumping $3 trillion into the financial markets between March 3 and June 6, 2020.) That blockbuster scoop, however, was buried because the Fed announced its new trading rules just hours after the scoop was reported.

The previously unreported trading by the Fed Chair is key because, regardless of compliance with any law, it violated clear and applicable Fed policies. At a minimum, that creates a crippling conflict of interest because the Fed Chair cannot criticize the conduct of others who traded (like regional Fed Presidents Kaplan or Rosengren) without having to admit that he too violated those policies.

The ethics officer’s warning and Fed Chair Powell’s trading raise a host of very troubling questions and highlight the need for the Fed to finally come clean with the American people.

The credibility, effectiveness, and reputation of the Fed are at stake.

At the same time, there is an ongoing discussion about the significant deregulation during Powell’s Chairmanship which he fully supported and continued to support as he testified before Congress as recently as July. Sen. Elizabeth Warren closely questioned Chair Powell at a recent hearing about this, concluding that this deregulation made him “a dangerous man” because it increased the risk of future financial crises and taxpayer-funded bailouts as happened in 2008.