The Fed Chair reappointment is hanging in the balance amid questioning of its leadership and an ethics scandal in the central bank. Jerome Powell’s term at the Federal Reserve is expiring early next year, and President Biden will have to decide to keep him at the helm.
Q3 2021 hedge fund letters, conferences and more
Fed Chair Reappointment
After nearly four years as Chairman of the Fed, Powell still has a good probability of being reappointed, The New York Times reports. This is so as “he has earned respect within the White House for his aggressive use of the Fed’s tools in the wake of the pandemic recession.”
However, despite Powell having the odds in his favor, the decision and the timing of any pronouncement has been surrounded by a great deal of ambiguity, as The White House is expected to issue a statement on the matter in the next few weeks.
Passing the spending legislation and the lifting of the U.S. debt limit are for now hogging the government’s agenda, but it is this very uncertainty that could complicate Jerome Powell’s renomination for the post.
Senator Elizabeth Warren of Massachusetts has been candid about his leadership, by pointing to Powell’s inaction at stopping top Fed officials from trading securities last year, when the central bank came to the markets’ rescue. This possibly gave the officials privileged information.
Critical Times
The NYT reveals that two regional presidents traded for their own profit in assets under the Fed’s actions’ influence, while the Fed’s vice chair Richard H. Clarida, “moved money from bond funds into stock funds in late February 2020, just before the Fed hinted that it would rescue markets and the economy.”
Senator Warren has attacked Powell’s track record on big bank regulation, and even went to call him a “dangerous man to lead the central bank.”
On Tuesday, during a Senate floor speech, Ms. Warren said, “It is not clear why Chair Powell did not takes steps to prevent these activities.” On the day before, she had sent a letter calling for the Securities and Exchange Commission (SEC) to launch a probe whether the transactions could mean insider trading.
Amid talk of the Fed Chair reappointment, Biden has reaffirmed his confidence in Powell but asserted that the government is also paying close attention to other pressing matters on the economic agenda.
“This is starting to feel like an incredibly consequential time for the Fed,” said Dennis Kelleher, the chief executive of Better Markets, as the job market is still very volatile and inflation is threatening the economic rebound.
