Fed Chair Powell Sends Stocks on a Wild Ride; Says “Premature to be Thinking about Pausing” Rate Hikes

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Fed Chair Powell Sends Stocks on a Wild Ride; Says “Premature to be Thinking about Pausing” Rate Hikes

Dow Jones Industrial Average, November 2, 2022

By Pam Martens and Russ Martens: November 3, 2022 ~

Fed Chair Jerome Powell at Press Conference on November 2, 2022

The Fed released its FOMC decision to raise interest rates by 0.75 percent at 2 p.m. yesterday, bringing its benchmark Fed Funds rate to a range of 3.75 to 4.00 percent. The decision contained this statement: “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

That statement was greeted as bullish by the stock market. As Fed Chair Jerome Powell’s press conference started at 2:30 p.m., the Dow had soared by 277 points. By 2:34 p.m., the Dow was up 400 points. But things dramatically changed when Powell started taking questions from the press. By 3:15 p.m. when the press conference ended, the Dow was down by 157 points and it continued to tumble for the next 45 minutes, ending the trading day at 4:00 p.m. with a loss of 505.44 points – a wild swing of 900 points in an hour and a half.

The market didn’t like most of what Powell had to say at his press conference, including that it he felt it was premature to be thinking about the Fed pausing its interest rate hikes. In response to a question from reporter Rachel Siegel of the Washington Post, Powell said the following:

“Let me say this. It is very premature to be thinking about pausing. So people, when they hear lags, they think about a pause. It’s very premature, in my view, to think about or be talking about pausing our rate hike. We have a ways to go. Our policy — we need ongoing rate hikes to get to that level of sufficiently restrictive and we don’t — of course, we don’t really know exactly where that is.”

Powell also conceded that hoping to guide the U.S. economy to a soft landing that avoids a recession is falling further out of the Fed’s reach. The exchange with reporter Nancy Marshall-Genzer of Marketplace went as follows:

Marshall-Genzer: Hi, Chair Powell. Nancy Marshall-Genzer from Marketplace. I’m wondering, has the window for a soft landing narrowed? Do you still think it’s possible?

Powell: Has it narrowed? Yes. Is it still possible? Yes. I think — we’ve always said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer it becomes harder to see the path. It’s narrowed. I would say the path has narrowed over the course of the last year really.

Marshall-Genzer: By how much?

Powell: Hard to say. Hard to say. Again, I would say that the sort of array of data in the labor market is highly unusual. And to many economists, there is a path to — ordinarily, there is a relationship to GDP going down and vacancies declining translating into unemployment, or there’s Okun’s law. So all those things are relationships that are in the data and they’re very real. Data’s a little bit different this time, though, because you have this tremendously high level of vacancies and we think on a very steep part of the Beveridge Curve. All I would say is that the job losses may turn out to be less than would be indicated by those traditional measures because job openings are so elevated and because the labor market is so strong. Again, that’s going to be something we discover empirically. I think no one knows whether there’s going to be a recession or not. And if so, how bad that recession would be. And, you know, our job is to restore price stability, so that we can have a strong labor market that benefits all over time. And that’s what we’re going to do.

Marshall-Genzer: But just real quickly, why do you feel like the window has narrowed?

Powell: Because we haven’t seen inflation coming down. The implication of inflation not coming down. And what we would expect by now to have seen is that as the — really, as the supply side problems had resolved themselves, we would have expected goods inflation to come down by now, long since by now. And it really hasn’t, although it’s — actually, it has come down, but not to the extent we had hoped. At the same time, now you see services inflation — core services inflation moving up. And I just think that the inflation picture has become more and more challenging over the course of this year, without question. That means that we have to have policy be more restrictive, and that narrows the path to a soft landing, I would say.

The Fed’s continuing trading scandal also came up at the Press Conference. That exchange went as follows:

Marte: Hi, Chair Powell. Jonnelle Marte with Bloomberg. So the Fed is facing two more ethics-related incidents, with the revision of the financial statements from President Bostic and President Bullard speaking at a closed event. So some senators, like Elizabeth Warren, are saying that this is a sign of greater ethics problems at the Fed. Could you talk about what this does to the public’s trust in the bank, and what the Fed is doing to prevent this kind of behavior from becoming common?

Powell: Sure. So you’re right, the public’s trust is really the Fed’s, and any central bank’s, most important asset. And anytime one of us, one of the policymakers, violates or falls short of those rules, we do risk undermining that trust. And we take that very seriously. We do. So at the beginning of our meeting yesterday, actually, we had a committee discussion of the full committee on the importance of holding ourselves individually and collectively accountable for knowing and following the high standard that’s set out in our existing rules with respect to both personal investment activities and external communications.

And we’ve taken a number of steps. And I would just say we do understand how important those issues are. I would say that our new — our new investment program that we have is up now and running. And actually, it was through that that the problems with President Bostic’s disclosures were discovered. When he filed his new disclosures, that’s — we now have a central group here at the Board of Governors that looks into disclosures and follows them, and approves people’s disclosures, and also all of their trades. Any trade anyone has to make, who is covered, has to be approved — pre-approved. And there’s a lag. It has to be pre-approved 45 days before it happens so there’s no ability to game markets.

So it’s a really good system. It worked here. And we — I think we all said to each other today — yesterday, actually — yesterday morning, we recommitted to each other and to this institution to hold ourselves to the highest standards and avoid these problems.

Marte: Do you have an update on the investigations that are pending?

Powell: I don’t. So, as you know, I referred the matter concerning President Bostic to the [Federal Reserve] Inspector General. And once that happens, I don’t — I don’t discuss it with the Inspector General or with anybody. It’s just the Inspector General has — he has the ability to do investigations. We don’t really have that. So that’s what he’s doing.

As multiple Fed watchdogs have indicated, the investigation of the Fed’s trading scandal belongs with both the Securities and Exchange Commission (which can bring only civil charges) – to investigate the potential that insider trading occurred – and with the Criminal Division of the U.S. Department of Justice, to determine if the transgressions rose to the level of criminal conduct. The Fed’s Inspector General reports to the Fed’s Board of Governors, which is chaired by Jerome Powell — hardly an arms-length investigation. For an understanding of just how sweeping and serious this matter actually is, see our related articles below.

Related Articles:

Robert Kaplan Was Trading Like a Hedge Fund Kingpin for Five Years while President of the Dallas Fed; a Dozen Legal Safeguards Failed to Stop Him

The Fed’s Trading Scandal Broadens into a Scandal with the Mega Banks It “Regulates”

Atlanta Fed President Bought Low and Sold High in 2020 as the Fed Bailed Out Wall Street; Then He Failed to Report those Trades

Senators on Senate Banking Committee Accuse Fed Chair Powell of Hampering Trading Scandal Investigation

The Fed’s Board of Governors Is Blocking the Release of Former Dallas Fed President Robert Kaplan’s Trading Records

The Inspector General Investigating the Trading Scandal at the Fed, Reports to Fed Chair Jerome Powell, Whose Own Trading Is Dubious

Senator Elizabeth Warren Puts the Heat on the SEC to Investigate Fed Officials for Insider Trading

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Senator Sherrod Brown Goes After 0-Count Felon Wells Fargo; Ignores 5-Count Felon JPMorgan Chase

 

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Senator Sherrod Brown Goes After 0-Count Felon Wells Fargo; Ignores 5-Count Felon JPMorgan Chase

By Pam Martens and Russ Martens: June 1, 2022 ~

Senator Sherrod Brown

Wall Street On Parade was previously a big fan of Senator Sherrod Brown, the Chair of the Senate Banking Committee. Not so much anymore.

Brown supported the nutty nomination of Saule Omarova to head the Office of the Comptroller of the Currency (OCC), the regulator of national banks, while attempting to spin the naysayers as part of a smear campaign.

So far this year, the Senate Banking Committee has held hearings on tangential areas while ignoring the biggest threats to financial stability in the U.S.: the $200.18 trillion in notional derivatives (face amount) concentrated at just five Wall Street megabanks (JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America).

There have been no subpoenas flying from the Senate Banking Committee as the Fed continues to cover up the largest trading scandal in its history and refusing to release to the media the dates of the former Dallas Fed President Robert Kaplan’s trades. Two of the megabanks overseen by the Senate Banking Committee – Goldman Sachs and Citigroup – have potential involvement in this trading scandal but the public has had no enlightenment from the Senate Banking Committee. (See our Fed Trading Scandal archive here.)

There has also been no in-depth investigation with subpoenas by the Senate Banking Committee of how many more Archegos family office hedge funds are out there, ready to blow up a federally insured megabank on Wall Street because it has given these hedge funds 85 percent leverage on margin loans, while disguising the hedge funds’ stock positions as if they belong to the bank. We have also seen no pushback from the Senate Banking Committee as the Justice Department portrays the most sophisticated megabanks on Wall Street as the victims of Archegos.

We could go on and on but you get the point.

Now Brown is going after Wells Fargo and its CEO Charles Scharf – which has zero felony counts notched in its belt – while ignoring JPMorgan Chase and its Chairman and CEO, Jamie Dimon, who has presided over five criminal felony counts, all of which the bank admitted to, while entering into an endless series of highly-suspect non-prosecution agreements and probation periods with the U.S. Department of Justice.

Yesterday Brown’s office sent out a press release assailing Wells Fargo and Scharf, calling out its “history of consumer abuses and gross mismanagement.” While it’s true that Wells Fargo has not been an Eagle Scout , it’s also true that when it comes to criminal activities, Wells Fargo is completely out of the league of JPMorgan Chase.

JPMorgan Chase’s first two felony counts from the Justice Department came in 2014 for its aiding and abetting role in the way it handled the business bank account of Ponzi-schemer Bernie Madoff. The bank told U.K. authorities that it thought Madoff was running a Ponzi scheme while failing to report its suspicions and money laundering by Madoff to U.S. authorities. The very next year the bank pleaded guilty to its role in a bank cartel (actually called “The Cartel”) that rigged the foreign exchange market. That resulted in felony count three.

There was a litany of other non-felony charges brought against the bank between 2015 and 2019. See its jaw-dropping Rap Sheet here. Then in September 2020 the bank agreed to pay criminal fines and admit to two felony counts of wire fraud for manipulating (spoofing) trading in the precious metals and U.S. Treasury markets. The Justice Department charged that JPMorgan Chase’s traders engaged in “tens of thousands of instances of unlawful trading in gold, silver, platinum, and palladium…as well as thousands of instances of unlawful trading in U.S. Treasury futures contracts and in U.S. Treasury notes and bonds….” Not to put too fine a point on it, but the U.S. Treasury market is how the U.S. government pays its bills and instills trust in the U.S. dollar as the world’s reserve currency.

In every one of these criminal cases, instead of going to trial, JPMorgan Chase was simply allowed to admit guilt and was given a deferred prosecution agreement by the U.S. Department of Justice. And, more outrageous, after every criminal count, the Chairman and CEO of the bank, Jamie Dimon, was not only allowed to remain in place but ended up with a bigger salary and bonus. (See After JPMorgan Chase Admits to Its 4th and 5th Felony Charge, Its Board Gives a $50 Million Bonus to Its CEO, Jamie Dimon.)

That $50 million “retention” bonus, by the way, was voted down by shareholders two weeks ago but the bank’s Board decided to ignore what its shareholders wanted and pay the bonus anyway. The $50 million bonus was on top of Dimon’s regular compensation for 2021, which totaled $34.5 million.

If Senator Brown is looking for the quintessential symbol of “gross mismanagement,” let us spell it out for him: the year after JPMorgan Chase, under Dimon’s management, scores its fourth and fifth criminal felony counts from the Justice Department, its Board of Directors awards Dimon a total of $84.5 million. That’s because the Board of JPMorgan Chase is, itself, a study in outrageous conflicts of interest.

In the letter that Brown sent to Wells Fargo’s CEO Charles Scharf yesterday, he says this about keeping the growth restriction that the Fed placed on Wells Fargo in 2018:

“It is clear that Wells Fargo still has a long way to go to fix its governance and risk management before it should be allowed to grow in size.”

But despite the fact that Jamie Dimon has presided over an unprecedented series of criminal charges, his bank has been allowed to grow to a mind-boggling size. Since the criminal charges started in 2014, JPMorgan’s deposit base has been allowed to double in size, from $1 trillion to more than $2 trillion according to the Federal Deposit Insurance Corporation’s data.

The OCC reports that the bank holding company for JPMorgan Chase has grown its assets from $2.57 trillion as of December 31, 2014 to $3.74 trillion as of December 31, 2021 – an increase of 46 percent in seven years. (See Table 14 here.)

As of December 31, 2021, Wells Fargo’s holding company’s assets stood at $1.95 trillion, or $1.79 trillion less than JPMorgan Chase.

In addition, the OCC also reports that the bank holding company for Wells Fargo held just $9.3 trillion in derivatives as of December 31, 2021 versus a staggering $49.2 trillion in derivatives at JPMorgan Chase. (See the same Table 14 linked above.)

What might explain why Senator Brown and the Fed are shining a bright light on Wells Fargo while allowing Jamie Dimon and his criminal enterprise to hide in the shadows? When it comes to Senator Brown, it’s more than likely that he has either conflicted or incompetent aides rooting out the problems at the megabanks.

When it comes to the Fed, the facts speak for themselves. JPMorgan Chase is the largest shareowner of the New York Fed, the regional bank to whom the Federal Reserve Board of Governors has outsourced supervision of the megabanks in that region. To put it more bluntly, bank examiners investigating JPMorgan Chase report to an institution that is owned by the very banks they are examining and whose CEOs rotate on and off its Board of Directors. (Dimon previously served two terms on the Board of Directors of the New York Fed, and was allowed to remain in that perch while he was Chairman and CEO of JPMorgan Chase and his bank was under investigation by the Fed and FBI for losing $6.2 billion of bank deposits from its federally-insured bank. The losses arose from its gambling in derivatives in London.)

Wells Fargo, headquartered in San Francisco, is a shareowner of the San Franciso Fed and is supervised by that regional Fed bank. It lacks influence at the powerful New York Fed.

JPMorgan Chase became the largest shareowner of the New York Fed because it has been insanely allowed to gobble up huge banks, antitrust law be damned. JPMorgan Chase’s massive deposit base came about as a result of these prior commercial bank mergers:  In 1955 Chase National Bank merged with The Bank of the Manhattan Company to form Chase Manhattan Bank. In 1991, Chemical Bank and Manufacturers Hanover announced their merger. Both banks had been severely weakened – Chemical from bad real estate loans and Manufacturers from bad loans to developing nations. In 1995, Chemical Bank merged with Chase Manhattan Bank. In 2000, JPMorgan merged with Chase Manhattan Corporation. In 2004, JPMorgan Chase merged with Bank One. In 2008, during the height of the financial crisis, JPMorgan Chase was allowed to buy Washington Mutual. These are just the largest bank consolidations. Over the years, Chase acquired dozens of smaller banks.

It’s time for Senator Brown to hire an experienced, non-conflicted investigative team to genuinely examine what’s really going on at the Wall Street megabanks – starting with the viper’s nest at JPMorgan Chase.

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What You Can Expect to Hear at the Fed’s Press Conference Today

 

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What You Can Expect to Hear at the Fed’s Press Conference Today

By Pam Martens and Russ Martens: May 4, 2022 ~

Fed Chair Jerome Powell

The Federal Open Market Committee (FOMC) will release its decision on hiking the Fed’s benchmark interest rate at 2:00 p.m. ET today, along with its plans for shrinking the Fed’s $9 trillion balance sheet. The announcement will be followed with Fed Chair Pro Tempore Jerome Powell holding a press conference at 2:30 p.m. ET. (Powell still awaits full Senate confirmation for a second term as Fed Chair, thus the designation “Pro Tempore.”

Wall Street is expecting a 50-basis point rate hike (half of one percent), which would put the Fed Funds rate in a range of 0.75 to 1 percent. Wall Street does not like large interest rate increases from the Fed because five of the megabanks are sitting with a $200 trillion albatross of derivatives around their neck with questionable counterparties on the other side of a lot of those trades. (See our report: Fed Chair Powell Telegraphs the Perfect Storm for Wall Street’s Megabanks: Rapid Rate Hikes Hitting $234 Trillion in Derivatives.)

The Fed is nothing if not obliging to Wall Street. The last time the Fed raised interest rates by a half-point at one meeting was on March 21, 2000 – more than two decades ago. At that FOMC meeting, the Fed Funds rate went from 6 percent to 6.50 percent.

The Fed likely remembers that between March 21, 2000 and March 21, 2002 the bubble Nasdaq stock market lost 60 percent of its value, with numerous bubble companies listed there going belly up.

The Fed knows it can expect a similar outcome with the Nasdaq this time around, following a series of Fed interest rate hikes. (See our report: SEC Chair Jay Clayton Left Markets in the Biggest Mess Since 1929.)

Other comparisons to historic market declines are starting to appear in the business press. On April 29, Barron’s reported that “the S&P 500 index has fallen 13% during the first four months of the year, its worst start since 1939.” Not to put too fine a point on it, but 1939 was during the Great Depression.

As of yesterday’s market close, the S&P 500 index has lost 12.39 percent year-to-date while the Nasdaq has shed 19.69 percent – which is tame compared to what some of its major components have done. Netflix is down close to 70 percent; Facebook has lost almost 40 percent; and PayPal is down over 50 percent. And that’s what’s happened with the Fed’s benchmark interest rate still hovering near the zero-bound range.

What you’re going to hear from Powell today at his press conference is a great deal of careful parsing of words. Pay attention to how many times Powell stops answering a reporter’s question extemporaneously and thumbs to a tab in a big notebook on his podium and starts reading his answer directly from the book. This has been happening regularly at Powell’s press conferences and shows just how nervous Powell is about triggering a temper tantrum on Wall Street.

What you are not likely to hear one question about today from a reporter is why Powell was testifying to the Senate Banking Committee that the big banks were a “source of strength” during the worst of the pandemic while the Fed was secretly shoveling trillions of dollars in cumulative bailout loans to both domestic and foreign global banks. See here and here.

Then there is the Fed’s trading scandal. This Saturday, it will be eight months since the Fed’s trading scandal broke in the news. This is the worst trading scandal in the 109-year history of the Federal Reserve, and yet, the public has heard nothing from the U.S. Department of Justice or the Securities and Exchange Commission as to whether either has opened a formal investigation of the outrageous conduct — which has the distinct odor of insider trading. (See our in-depth reporting on the various aspects of the scandal at this link.)

Adding to the public’s disgust with the trading scandal, Powell had the audacity to ask the Fed’s own Inspector General to take charge of the trading scandal investigation. Unlike the Inspector General of the U.S. Department of Justice, as well as more than 30 other Federal agencies, the Inspector General of the Federal Reserve is not nominated by the President of the United States and confirmed by the U.S. Senate. Instead, the Fed’s Inspector General is appointed by the “head” of the Federal Reserve Board of Governors; he reports to that same Board of Governors; and he can be terminated by the Board of Governors with a two-thirds vote.

You can watch the Fed’s press conference live beginning at 2:30 p.m. ET today at this link. 

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Fed Governor Lael Brainard Should Not Be Leaking Details of Fed FOMC Minutes, Especially Given Her Husband’s Ties

 

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Fed Governor Lael Brainard Should Not Be Leaking Details of Fed FOMC Minutes, Especially Given Her Husband’s Ties

By Pam Martens and Russ Martens: April 12, 2022 ~

Lael Brainard, Fed Governor and Nominee for Fed Vice Chair

Multiple current and former Federal Reserve officials remain under investigation for the worst trading scandal in Fed history. This investigation includes the former President of the Dallas Fed, Robert Kaplan, who traded in and out of S&P 500 futures contracts in lots of “over $1 million” while sitting as a voting member of the Fed’s Open Market Committee (FOMC), which sets interest rates and makes other critical monetary policy decisions that move markets. The investigation also involves former Boston Fed President Eric Rosengren, who actively traded in a joint account with his wife, who had been given a margin account by a Fed supervised bank, Citigroup’s Citibank. (See our extensive archive on the Fed’s trading scandal.)

Last Tuesday, President Biden’s nominee for Fed Vice Chair, Lael Brainard, who has been a Fed Governor since 2014 and has had a permanent voting seat on the FOMC throughout that time, delivered a speech to a conference at the Minneapolis Fed. During the speech, Brainard raised eyebrows and tanked the stock market when she said this:

“Accordingly, the Committee [FOMC] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting. Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19.”

Brainard had effectively leaked key components of the FOMC minutes to the press which were not due to be released until the following day — Wednesday, April 6. When those minutes were released on Wednesday afternoon, April 6, they confirmed what Brainard had said the day earlier about balance sheet reduction in May being a possibility. The FOMC minutes read:

“Participants also agreed that reducing the size of the Federal Reserve’s balance sheet would play an important role in firming the stance of monetary policy and that they expected it would be appropriate to begin this process at a coming meeting, possibly as soon as in May.”

Reducing the size of the Fed’s balance sheet means a further tightening of monetary policy on top of the tightening from the Fed’s interest rate increases. Following news of Brainard’s comments on Tuesday, April 5, the Dow Jones Industrial Average closed with a loss of 280.7 points while the Nasdaq tanked 328.39 points.

CNBC’s Fed reporter, Steve Liesman, had obtained a copy of Brainard’s speech ahead of her talk and released its key components on CNBC on the morning of Tuesday, April 5. The tech-heavy and interest-rate sensitive Nasdaq went into a sharp selloff on Liesman’s report of what Brainard was going to say. Anyone who had advance knowledge of the contents of Brainard’s speech could have made serious profits by shorting S&P 500 futures before the market opened and then closing their position after the stock market dived.

Why would a Fed Vice Chair nominee facing a Senate confirmation vote and who is keenly aware of the Fed’s trading scandal and the sensitivities around keeping a lid on FOMC minutes until their official release, decide willy-nilly to leak a portion of those minutes to the press a day ahead of time?

It is difficult to come up with any good answer to that question. What we do come up with are more questions, given the background of Brainard’s spouse.

Kurt Campbell, National Security Council Coordinator for the Indo-Pacific

Brainard’s husband is Kurt M. Campbell, who was appointed by President Biden on his first day in office on January 20, 2021 to be his “Asia Tsar,” with the official title of National Security Council Coordinator for the Indo-Pacific. While Campbell did have prior government experience, having served in the Obama administration as Assistant Secretary of State for East Asian and Pacific Affairs, he also came to the Biden administration with eight years of baggage.

Campbell’s most recent work experience had been as Chairman and CEO of The Asia Group, a company he founded in February 2013. Campbell’s financial disclosure form filed with the Office of Government Ethics shows that it has been “revised” 14 times in the span of a year. Revisions include adding additional work positions outside of the U.S. government as well as adding additional sources of compensation that exceed $5,000 a year. (That vague criteria for compensation leaves the public wondering if the compensation was $5,001 or $5 million or $50 million, for that matter.)

A position in National Security for the United States typically would conjure up people who are precise, meticulous in detail and lacking in conflicts of interest. Needing to make 14 revisions to one’s initial financial disclosure form over the course of a year is not a good look. Neither is the fact that the key man who will be advising on U.S. relations with China reports on his financial disclosure form that he had received compensation of more than $5,000 from three weapons manufacturers: Lockheed Martin, Northrop Grumman and Raytheon.

On April 6 we emailed the media relations folks at The Asia Group (TAG) and posed the following questions:

“Can you tell me if Kurt Campbell continues to have any financial ties to The Asia Group or any of its affiliates. (Financial ties would include: an equity ownership; deferred compensation; 401(k); unvested stock options; etc., etc.)

“Also, could you tell me if TAG has a hedge fund.

“And, finally, exactly what does TAG Capital do?

“My deadline is 7 p.m. ET this eve.”

We received no response. We emailed a second request for the same information yesterday. We received no response.

Our query regarding a “hedge fund” was based on the fact that records show a company called “TAG Capital” is listed at the same address and Suite number in Washington D.C. as The Asia Group.

At The Asia Group’s website, it lists among its services the following:

“Leverage network of leading media personalities and executives in markets throughout Asia to advance client message either directly or indirectly…

“High-level information from an expansive network of sources…

“Protect corporate equities against over-the-horizon risks…

“Help form relationships between clients and key policy influencers, regulators and decision-makers…

“TAG Analytics generates high-impact analysis of developments across the Asia-Pacific that shape market and trading strategies and business outcomes.”

The instructions for Campbell’s financial disclosure form tell him to report under Part 7, “Transactions,” the following information: “…purchases, sales, or exchanges of real property or securities in excess of $1,000 made on behalf of the filer, the filer’s spouse or dependent child during the reporting period.”

Instead of listing securities transactions, Campbell simply writes that they are “Not required for this type of report.”

With each passing day, the lack of outrage from millions of engaged Americans via phone calls to their members of Congress is accelerating America’s race to the bottom and the installation of a kleptocracy in Washington.

WALL STREET ON PARADE

The Fed Responds to Report that Fed Chair Powell Traded During FOMC Blackout Periods

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The Fed Responds to Report that Fed Chair Powell Traded During FOMC Blackout Periods

By Pam Martens and Russ Martens: February 11, 2022 ~

A Fed spokesperson has provided Wall Street On Parade with a detailed response to our article yesterday, which documented that trades were made in accounts in which Fed Chair Jerome Powell had a financial interest during a Federal Open Market Committee (FOMC) meeting in 2015 and another in 2019. Fed officials are clearly prohibited from trading before and during FOMC meetings because that is when they have insider, market-moving information.

Below is the full statement from the Fed spokesperson. Following the statement, we will explain its many, serious flaws.

“Chair Powell has not traded during FOMC blackout periods. The transactions that were reported occurred in family trusts over which he had no control. Chair Powell is not a trustee and did not direct or control the trades. He relinquished his previous role as a trustee in 2012 when he joined the Federal Reserve as a Board Member.

“These transactions were regular trades for the purposes of the trust, e.g., raising money for donations under the terms of a charitable trust. The trust is legally required to make certain charitable donations every year. In practical terms, this means that transactions must occur in order to free up funds for those donations.

“The trust financial advisor was advised of our blackout periods and was directed to avoid transactions during those blackout periods. Although they were aware of the FOMC blackout dates, the advisor mistakenly made some transactions during some blackout periods. These transactions were reported as part of his publicly available financial disclosures, which have been available regularly every year since he joined the Board. They are available to anyone through the Office of Government Ethics website, OGE.gov.”

Flaw Number 1: The 2015 trades occurred in “Powell Family Trusts” 3 and 4; the 2019 trades occurred in the “Powell Family Trust 3.” Powell’s financial disclosure forms, which he signed, define what has to be reported under “Part 7, Transactions” as follows: “Part 7 discloses purchases, sales, or exchanges of real property or securities in excess of $1,000 made on behalf of the filer, the filer’s spouse or dependent child during the reporting period.” Thus, Powell or someone in his immediate household had an interest in the assets being sold during two separate FOMC meetings. The assets were not held in Blind Trusts, so Powell – who has a law degree – should have been on top of what was happening in these accounts.

Flaw Number 2: Powell signed an Ethics Agreement in 2017 where he agreed to the following:

“If I have a managed account or otherwise use the services of an investment professional during my appointment, I will ensure that the account manager or investment professional obtains my prior approval on a case-by-case basis for the purchase of any assets other than cash, cash equivalents, investment funds that qualify for the exemption at 5 C.F.R. § 2640.201(a), obligations of the United States, or municipal bonds.”

It follows, logically, that Powell would do the same thing for sales transactions, i.e., give his approval on a “case-by-case basis.”

Flaw Number 3: The statement regarding the need to raise cash to fund charitable donations is not convincing. Many wealthy individuals gift appreciated securities to charity, obtaining a tax advantage in doing so. Regardless, in both 2015 and 2019, waiting one extra day to make the trades would have avoided running afoul of the Fed’s prohibition on trading during the blackout period around FOMC meetings.

Flaw Number 4: Powell signs all of his financial disclosure forms, including those for 2015 and 2019. Why didn’t he notice that there were trades listed that occurred on FOMC meeting dates and issue a timely public apology?

Flaw Number 5: According to the Congressional Research Service, this is the prescribed procedure at the Fed that is supposed to prevent the problems outlined above, as well as those of the three Fed officials that have resigned over their own trading scandals since last September:

“Financial disclosure reports from covered officials, including the original entrance reports and the annual reports filed by May 15, are to be reviewed by supervisory ethics personnel to identify potential ethics and conflict problems, and to resolve any conflict of interest issues that may be raised by the ownership of certain assets by a particular public official. Remedial action which may be required by ethics officials to resolve identified conflicts of interest with respect to certain assets may include divestiture, establishment of a qualified blind trust, procurement of conflict of interest waivers, specific written recusal instruments, and requests for voluntary transfer or reassignment.”

It was not an Ethics Officer at the Fed who disclosed to the public the fact that trades in Powell’s accounts occurred on an FOMC meeting date. It was an activist group called Occupy the Fed.

In fact, the General Counsel and Ethics Officer of the Dallas Fed, Sharon Sweeney, allowed Dallas Fed President Robert Kaplan to trade in and out of “over $1 million” S&P 500 futures contracts from 2015 through 2020. These types of contracts can be used to make directional bets on which way the stock market is going to move. They trade during and after the stock markets in the U.S. have closed – almost continuously from Sunday evening to Friday evening. (See our report: Robert Kaplan Was Trading Like a Hedge Fund Kingpin for Five Years while President of the Dallas Fed; a Dozen Legal Safeguards Failed to Stop Him.)

Supervisory ethics personnel at the Fed also did not stop Fed Chair Powell from having upwards of $25 million of his family wealth managed by BlackRock while the firm was given three no-bid contracts by the Fed.

The Fed is not some mom and pop shop in Dubois. It’s the central bank of the United States with a current balance sheet of $8.9 trillion, 98 percent of which American taxpayers are on the hook for. It’s also in charge of supervising the most dangerous megabanks in the United States, which continue to be serially charged with crimes against the investing public while the Fed continues to bail them out.

Do we really want a man at the helm of this sprawling institution who can’t even own up to his failure to police his own trading activities?

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