It was October 2020, while the Covid-19 pandemic was still raging, Federal Reserve Chairman Jerome Powell sold his stakes in a Vanguard stock fund for more than $ 1 million. (more than 857,000 euros). In this year of crisis, the man in charge of US monetary policy carried out five other transactions in September and December for amounts between 15,000 and 250,000 dollars. He sold his securities for “personal needs”, according to Fed rules, when markets were low – the stock market soared in November 2020 after the discovery of the Covid-19 vaccine.
Nevertheless, the affair complicates his reappointment for a second term at the head of the Federal Reserve, on 1er February 2022. Two presidents of regional banks, those of Dallas and Boston, have already had to resign at the end of September for having actively managed their portfolios, while the Fed was at the bedside of the economy, with rates brought to zero and massive purchases corporate and bank debts.
These stock sales are giving arguments to the left wing of the Democratic Party, especially Massachusetts Senator Elizabeth Warren, who wants to block Mr Powell and is campaigning for his replacement by progressive Lael Brainard, 59, PhD in economics at Harvard and former member of the Obama teams. This member of the Board of Governors of the Fed since 2014 was careful not to carry out any financial transaction during the year 2020. Mme Warren criticizes in particular Mr. Powell insufficient regulation of Wall Street.
War of influence
The battle for the Fed chairmanship gives rise to an intense behind-the-scenes war of influence. Since Paul Volcker, originally appointed by Jimmy Carter and kept for a second term by Ronald Reagan, tradition has been that a new White House tenant does not change the Fed boss. Donald Trump broke it, by not renewing Democrat Janet Yellen, preferring moderate Republican Jerome Powell.
Barely arrived at the head of the Fed, Mr. Powell decided to hike rates, before backing down in January 2019, proving Donald Trump who had criticized him right. A year later, at the start of the pandemic, Mr. Powell gave massive support to the economy and called on Congress to do the same, so as not to repeat the mistakes of the 2008 crisis. During the summer of 2020, he revisited the Fed’s doctrine, which now targets full employment, including for minorities. He also raised the inflation target, which can now exceed the 2% threshold. While Mr. Powell has underestimated the current inflationary surge, he has so far ruled out any rate hikes. In short, although republican, the one who was approved by the Senate by 84 votes to 13 in 2018 appears as a “dove”.
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