New Jerome Powell Controversy
Author: Greg Valliere
March 17, 2023
THE NEW YORK TIMES REPORTS this morning that Powell objected to a passage that Biden aides wanted in the statement that supported a thorough spotlight on “shortcomings in financial regulation that contributed to the banks’ rapid descent.”
BUT POWELL, ACCORDING TO THE TIMES ACCOUNT, blocked efforts to include a phrase citing regulatory failures in the joint statement that was released Sunday evening. The talks became tense, as Biden aides insisted that lapses in bank regulation and supervision had contributed to the problems that weakened the bank.
POWELL WANTED TO FOCUS on steps to shore up the financial system, and he prevailed — the statement did not cite regulatory lapses. But there was an immediate focus on the San Francisco Fed, which was viewed by some insiders as overly cozy with the Silicon Valley Bank.
THE BANK’S PRESIDENT, Greg Becker, served on the San Francisco Fed’s board of directors. Becker drew immediate criticism for selling $3.6 million in the company’s stock just days before the bank failed, and SVB’s chief compliance officer left last April with no replacement until late last year; he lives in New York, not Calironia.
BY MONDAY THE REVELATIONS may have prompted Powell to change his tune. The SVP collapse demands a “thorough, transparent and swift review by the Federal Reserve,” Powell stated. Congressional hearings could embarrass the Fed, Hill sources tell us; politicians on the left and right are increasingly critical.
THIS WON’T BE THE FIRST TIME the Fed came under criticism for lax regulatory policy; several top officials have been eased out of the Fed for excessive trading on their personal accounts, which shocked Fed veterans. The Fed was always considered “squeaky clean.”
MORE THAN JUST REGULATORY LAPSES: Powell’s detractors believe he has done a poor job on monetary policy. The Fed Chairman clearly missed the inflation surge, claiming for months after prices began rising that it was “transitory.” Once it became clear that inflation would persist, he hammered the economy — housing in particular — with a monetary sledgehammer.
FED INSIDERS LIKE POWELL PERSONALLY, but they point out that he doesn’t have a PhD in economics, like most of his predecessors, and may not be a “wartime consigliere” as they said in The Godfather. Powell’s second term expires in 2026, and it’s a pretty safe bet that there will not be a third term.
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