President Biden reiterated that he has confidence, just, in Federal Reserve Chair Jerome Powell, hours after Elizabeth Warren, the democratic senator for Massachusetts said she believed Powell had ‘failed as a leader’ amid fallout from financial trades made by top Fed officials last year. ‘For Fed officials to actively trade in the market raises legitimate questions about conflicts of interest and insider trading’ she said in a Senate speech, adding ‘These Fed officials actually show, at a minimum, really bad judgment’. Over the last few weeks Warren has been Powell’s staunchest critic, claiming that he failed to take action and ignored a ‘culture of corruption’ over trades that took place as the global pandemic hit.
When Biden was asked about whether he still had confidence in Powell whilst on a visit to Michigan, he responded ‘Well, thus far yes, but I’m just catching up to some of these assertions’. The backing was also echoed, again in the same vague language, by Karine Jean-Pierre, the White House spokesperson, who when asked said the leader of the free world ‘does have confidence in Powell, at this time’.
The Fed, and Powell have been in Warren’s crosshairs since it was disclosed that Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan actively traded in stocks and other assets while the central bank was desperately trying to shore up financial markets and the world economy. Both Rosengren and Kaplan announced their resignations last week.
To add fuel to the fire, attention turned to Fed Vice Chair Richard Clarida, who moved up to $5 million out of a bond fund into stock funds in February 2020. The trade happened just 24 hours before Powell stated that the Fed might take action to cushion the economy as the pandemic took hold.
Since the last day of Feb ’20, the Dow is up 35%, the S&P up 47%, and the NASDAQ up 68%.
As the saying goes, it's not what you know but who you know.