Congressional authority to create independent agencies comes with the responsibility to oversee them. Performing that function well is one aspect of the First Branch that separates it from all other public institutions of our government. If trading activities of senior Federal Reserve System officials merit punishment, it will come and will likely be followed by shame and regret.
Absent proof of real trading scandal(s) among Federal Reserve System officials or senior staff as opposed to presumptuous attacks designed to lever policy preferences, we reiterate our call that Jerome Powell will be renominated to chair the Federal Reserve Board. Unearned taint of disrepute for any central bank cannot further the goal of employment, stable prices, or financial stability. This is uniquely true of the central bank of the global reserve currency. One’s opinion of shortcomings in any of these broad responsibilities isn’t terribly motivational unless the perceived wrongdoing persuades 218 members of the House of Representatives and 60 US senators to pass a law.
After the 2007-09 recession, some Republicans, and elements of the hard right engaged highly political, seriously lacking bum rushes at the Fed. It faded relatively quickly and never reached committee, much less floor action. After the 2020 recession some Democrats and elements of the hard left have mimicked the futile, needless behavior albeit for reasons they assert are more honorable. Both broadsides were/are equally wrong.
Some in Congress believe the Fed is either late to this discussion or has entered a realm it shouldn’t. The fact that some see the System’s turn toward exploring the economic benefits of diversity as “wokeness” intentionally or otherwise attempts to minimize the structural, on-going effects of economic exclusion. Irrespective of one’s view, the validity of the conversation distinguishes itself from trolling Fed officials with accusations of wrongdoing without proof. That evidence, if available, will come from what will eventually be a public document, including inevitable public hearings at some point.
The Fed irrefutably until very recently, like much of the economics profession upon which it relies, wasn’t attuned to harm done by monetary policies over decades that did not evince an inclusive view of the US society. That observation isn’t an attempt to broaden the Fed’s dual mandate, it is an undeniable truth. Anyone participating in the district banks’ numerous symposia on the subject cannot believe the Fed is merely engaged in covering their public affairs assets.
We don’t come to praise the Fed as much as to acknowledge the evolutionary, imperfect, vital role it’s served for nearly eleven decades. Everyone there including chairs, governors, district presidents, public board members, and staff should feel immense fealty to the nation given the awesome responsibilities entrusted them. Congress owes American workers, markets (equity and credit), and global stakeholders their level best to ensure the 1913 charter is upheld to the benefit of everyone on this list.
We’ve previously noted that after the Lehman Brothers contagion, the district banks were reformed to guarantee greater diversity of experiences, views, and people on the twelve boards. How those people are compensated was also changed. Reforms of what senior staff and Fed officials can trade in their personal accounts announced yesterday by Chair Powell likely put that saga to rest unless facts merit additional action.
