It’s time to call a spade a spade
The notion that the Fed is some kind of sterling institution needs to be put to bed. This is particularly true of the Powell Fed which has experienced multiple scandals involving criminal activity. The fact that no one went to jail because “laws are for little people” doesn’t absolve the Fed.
Let’s wind back the clocks.
During the pandemic, when millions of people were losing their jobs, despairing of their futures, and terrified of dying, senior Fed officials were making MILLIONS of dollars trading on insider information based on Fed policy decisions.
Specifically, three Fed Presidents, Dallas Fed president Robert Kaplan, Boston Fed president Eric Rosengren, and even the Fed’s #2, vice chair Richard Clarida were all flagged for making “suspicious trades” (read: insider trading) right before the Fed made major policy announcements that moved the stock markets.
They made MILLIONS of dollars in the process.
On a side note, you KNOW these individuals weren’t the only ones doing this. They were simply the ones who got caught. A full audit of trading activity by Fed officials and those near and dear to them would have likely revealed that many Fed insiders and their friends/ family members were doing the same thing.
The official narrative is that the Fed dealt with this issue “internally” and these individuals resigned, so the matter was closed. So apparently, you can commit MAJOR crimes, get wealthy in the process, keep the money AND avoid jail time provided the words “Fed official” are next to your name.
Who knew?
Somehow Fed Chair Jerome Powell emerged unscathed from what should have been a career ending scandal (again, he’s in charge of an entity in which much of senior leadership was engaged in insider trading during a pandemic). How he pulled that off, I have no idea.
Fast forward to 2022, and Powell pulled off one of the most egregious economic policies in history… proclaiming that inflation was “transitory” during the worst inflationary storm in 40 years. As if that’s not bad enough, for whatever reason, he pivoted from claiming this within ONE WEEK of being nominated for a second term as Fed Chair by then-President Biden.
Did Powell proclaim inflation transitory for career reasons, dangling this over the Biden administration’s head until he was nominated for a second term? Only he knows. But the optics of this was disgusting, especially when you consider what inflation was doing to American households. Again, this was a MAJOR scandal, but Powell skated on it.
Then there’s the Fed’s renovations of its DC headquarters, which somehow costs over $2.5 BILLION. To put that into perspective, you could build one or two NFL football stadiums for the same amount of money.
Yes, you could house one or more NFL franchises for the cost of what the Fed is spending renovating its headquarters.
Here again, the Powell Fed is given a pass. Why? I have no idea. It’s not as if the Fed is a popular entity with the American public. And it’s not as if the Powell Fed has a sterling track record that has generated enough good will to overlook the optics of this: remember, Powell and his colleagues printed $5 TRILLION in the span of 20 months, unleashing the worst bout of inflation in 40 years, lied about inflation being a problem for a year, and then finally embarked on the Fed’s most aggressive monetary tightening in history, triggering a bear market in stocks AND bonds, erasing over $12 TRILLION in wealth in 2022.
Insider trading, abject careerism, overspending on projects: these would be career ending issues for most executives. Heck, anyone else working in the private sector would have been fired long ago.
Which brings us to the Lisa Cook fiasco.
Lisa Cook was sworn in as a Fed Governor in 2022. It has since been discovered that she listed TWO residences as her primary residence on mortgage applications… then proceeded to rent the properties out. This is mortgage fraud.
President Trump has fired her. But she is refusing to leave her position… because again, if the words “Fed official” are next to your name the laws and basic rules of society don’t apply to you. Apparently being an unelected official means you can ignore everyone including the President of the United States!
Who knew?
This has set the stage for a MAJOR legal battle. By refusing to leave her post, Cook has opened the door to courts having to decide whether the Fed is under the Executive Branch… or extra-constitutional. If the Fed is found to be extra constitutional the political/ public outrage will be immense.
I and other commentators have been pounding the table on the Fed’s bizarre status for decades. But this pending legal showdown will open the door to EVERYONE finding out what I’ve known: that our currency and economy are controlled by unelected bureaucrats who are part of an entity that is NOT part of the government.
How will this play out?
Well, for one thing it opens the door to President Trump firing Fed Chair Powell “with cause.” After all, if Powell doesn’t force Cook to vacate her role, he is openly defying the President. Given the contentious relationship between the two, it’s not a stretch of the imagination that Trump will jump on the opportunity to get rid of Powell.
This would mean President Trump effectively co-opting the Fed in that he will have directly appointed the majority of Fed voting members including the Fed Chair, the single most powerful Central banker in the world.
The markets seem to be hinting this will be the case. After staging the worst first half of a year since 1973, the $USD is failing to catch a bid. As I write this, it’s on the verge of taking out its upwards trendline from the July lows.
This is a signal that new lows are likely… which would make sense if the White House takes over the Fed and “runs the economy hot” with rate cuts while running a deficit equal to 6% of GDP.
This would unleash another inflationary storm… and present investors with a ONCE in a lifetime opportunity. The U.S. has had a debt problem for decades… but the great inflationary collapse could finally be arriving due to the Fed’s scandals.
