Al Drago/Pool via AP
Federal Reserve Chairman Jerome Powell leaves after testifying during a House Financial Services Committee hearing, September 30, 2021, on Capitol Hill in Washington.
This morning, we broke the story that the Fed’s insider trading scandal extended to the Fed chair, Jay Powell, himself, noting why the timing of his multimillion-dollar October 1, 2020, stock sale looked highly suspect.
There’s more to the backstory. Part of it is misrepresentation and cover-ups by Powell loyalists at the Fed, compounded by some of their allies in the press.
For instance, while Powell’s big trade of last October had not been previously reported, CNBC had noticed from disclosure documents that Powell owned and traded municipal bonds, at a time when the Fed was supporting that market. Fed officials assured CNBC that Powell had no personal control over those holdings. That turned out to be a lie.
The updated CNBC piece included a rare editor’s note that said: “This story has been updated to reflect new information. Fed Chair Powell owned the municipal bonds in question in a joint account over which he had control. Due to incorrect information provided by the Federal Reserve, CNBC reported initially that Powell owned the munis in a family trust over which he had no control.”
The Fed’s spin all along has been to insist that these trades were no big deal. In today’s Wall Street Journal piece, which mentions Powell’s October 1 stock sale in passing, the writer takes at face value the Fed’s assurance that this sale was totally consistent with Fed ethics rules: “A Fed representative said Mr. Powell’s financial transactions squared with central bank rules and were signed off on by government ethics officers.”
But of course, the Journal’s writer, Michael S. Derby, in giving Powell an alibi, gets the implication backwards. The obvious point is that “government ethics officers” were not even enforcing the Fed’s own far too weak code of ethics, as the Prospect story pointed out.
Pro-Powell spin has become a habit for the Journal. A Friday Journal piece, by Nick Timiraos, actually tried to use the trading scandal to burn Powell rival Lael Brainard, a Fed governor who has made no trades. The Timiraos piece quotes three sources friendly to Powell contending that “if this implicates Powell, it also implicates Brainard, too.” Say what?
The rationale is that Brainard is the Fed governor with oversight for regional Fed banks. But as this Prospect piece pointed out, Powell ultimately is the controlling officer: “The Federal Reserve Act specifies in Section 10.2 that ‘the chairman of the Board, subject to its supervision, shall be its active executive officer.’”
The document showing Powell’s October 1 stock sale is public record. In the course of researching my piece, I quickly became aware that other reporters from mainstream media were sniffing around this story. The fact that it took the Prospect to break it speaks volumes about the cozy collusion between Powell and the beat reporters who regularly cover him.
