Powell's Fed Is Running Out of Time to Decide What Path to Take

 

The nation is suffering from the consequences of installing corrupt and incompetent leadership over the course of many years.

In 2016, I could see the country returning to the attitudes it had prior to the 2008-2009 bust.  Hank Paulson, Nancy Pelosi, Janet Yellen, Ben Bernanke, Obama, etc. set up a mindset within the population that no matter what, the Fed would have Wall Street’s back.  That idiot George W. Bush made the statement in a meeting when Bear Stearns and Lehman went tits up that the whole enchilada could tank – and it would have without the intervention of Congress and the Fed.  And yes, many “too big to fail” entities would have failed.  Instead, the inevitable was put off.   The can was successfully kicked down the road a little further.   By 2018, it became abundantly clear how addicted to the Fed’s cheap funding Wall Street had become.  For that matter, the political class had as well.  I remember Trump publicly lambasting Powell for ever so slightly raising the overnight interest rate to something that was still historically very low.  All real estate developers love cheap interest rates.  Trump was in many ways a bag of hot air and I doubt that he was really worth what he claimed.  Powell should have told him to go fuck himself when he was pressuring him to lower interest rates.  Strangely, I think Trump would have respected him had he done so as that’s the way real estate developers from Queens, NY roll.  He may not have liked Powell, but he would have respected him.

Covid-19 was not responsible for the mess that this country is in today.  It was the reaction taken by leadership when Covid-19 broke out that has caused this current situation.  Policy error piled upon policy error over the course of several years were compounded again after Covid-19 emerged.  Sprinkle in a little corruption and you have a perfect source of mistrust for the most powerful economic institution in the US and possibly, the world.  The Fed’s glory days are behind it but it remains an 800 pound gorilla in the financial markets.

My advice to Powell: throw out anyone who showed any signs of impropriety during the 2019 – 2020 timeframe.  Restore your integrity.  Throw them to the wolves publicly and make an example out of them.

From Forbes, 2/12/2022:  "The U.S. Federal Reserve, responding to a Freedom of Information Act request by Reuters, said there are about 60 pages of correspondence between its ethics officials and policymakers regarding financial transactions conducted during the pandemic year 2020.

"But it 'denied in full' to release the documents, citing exemptions under the information act that it said applied in this case."

So, this public institution, sitting atop the U.S. financial system with immense power to alter markets and the economy, has "denied in full" to release key information about the insider trading issue? Why not a redacted release or even a summary of what those 60 pages are all about? The obvious conclusion is that the information is too revealing - that it shows appearances of impropriety.

Then, for the fucking love of God, stop listening to Neel Kashkari and Raphael Bostic entirely.  Those two could not find their own asses using both hands, a compass and a map.  They are feathers in the wind who are dead weight on the Great Ship Fed.  Start listening to Bullard.

Lastly, please, please, please – go to Tom Hoenig and BEG him to come back.  Pull whatever fucking procedural strings you have to pull to get him back into the discussions about future policy as he is, to my mind, Chingachgook, the last of the Mohican Chiefs.

Bio from the Fed History: Thomas Hoenig, who served as president of the Federal Reserve Bank of Kansas City from 1991 to 2011, was the first president to rise through the ranks of the organization. He became well known for his views on the "too big to fail" issue and his dissenting votes on the Federal Open Market Committee in 2010.

Hoenig, the second of seven siblings, was born in Fort Madison, Iowa. The son of a plumbing contractor, he left Iowa in the mid-1960s to attend what was then called St. Benedict’s College in Atchison, Kansas, earning a bachelor’s degree in economics and mathematics from the school, which was later renamed Benedictine College. Plans for graduate school were delayed by the draft for the Vietnam War.

Once back in the states, Hoenig married Cynthia Stegeman and moved to Ames, Iowa, where he pursued a master’s degree, and later a doctorate, from Iowa State University.

While visiting Kansas City in 1971, Hoenig saw a newspaper article about how the Kansas City Fed had created the Division of Bank Supervision and Structure that would conduct financial and competitive analysis on bank mergers.

Two years later, Hoenig applied for a job in the Division, and he took the position in part because of his familiarity with the area but also because it was a unique opportunity that perfectly matched his interests.