By Pam Martens and Russ Martens: October 4, 2021 ~
Senator Elizabeth Warren Grilling Fed Chairman Jerome Powell at September 28, 2021 Senate Banking Hearing
In a publicly-released letter issued today to SEC Chairman Gary Gensler, Senator Elizabeth Warren has put Fed Chairman Jerome Powell on notice that his plans to conduct a self-investigation of the Fed’s trading scandal isn’t going to fly with her. Warren is a member of the powerful Senate Banking Committee that oversees the Federal Reserve.
Warren called on the SEC to “investigate trading in securities by high-level Federal Reserve officials and determine if any of these ethically questionable transactions may have violated insider trading rules.”
Warren characterized the trading by Fed officials as reflecting “an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”
At one point in the letter, Warren sounded like she might be trying to flush out someone looking for a plea deal to avoid an orange jumpsuit. She invoked the possibility of a person engaging in insider trading serving time in prison. Warren wrote:
“It is not clear why Chair Powell did not stop these activities, which corrode the trust and effectiveness of the Fed. The Fed officials’ trades clearly run afoul of Fed guidelines stating that officials should ‘avoid any dealings or other conduct that might convey even an appearance of conflict between their personal interests, the interests of the System, and the public interest.’ And, if they involved ‘purchasing or selling a security while in possession of material nonpublic information’ – which could have been the case given that Fed officials routinely are in possession of such information – they may have violated SEC’s insider trading rules. Such violations may subject individuals to civil penalties of ‘three times the amount of the profit gained or loss avoided’ and criminal penalties up to $5,000,000 and 20 years imprisonment.”
Just this morning, Wall Street On Parade published an article in which we called on the Senate Banking Committee to conduct a hearing and take sworn testimony from the CEOs of Goldman Sachs and Citigroup regarding their firms’ involvement in the trading by Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, respectively. These banks are supervised by the Federal Reserve while also appearing to be centrally involved in the trading scandal swirling around the Federal Reserve Bank Presidents.
A Senate Banking Committee hearing under oath would get some important, initial answers to the American people far more quickly than waiting for months, if not years, for an SEC investigation to conclude. That information might be critical to helping President Biden decide if he wants to nominate Powell for another term as Fed Chair or if it’s time for a Fed house cleaning.
