FED OIG's Sham Investigation of FED Chair Powell and Former VC Clarida Is A PR Fluff Job
TLDR: "We thoroughly investigated ourselves, undertook zero analysis, and find we did nothing wrong"
If your direct boss allegedly violated the rules, would you feel comfortable conducting a thorough investigation? And could anyone trust the results? Well, that’s precisely what the FED expects from the FED’s own Inspector General, who just supposedly “cleared” Fed Chair Powell and former Vice Chair Clarida of wrongdoing in connection with the sprawling Fed insider trading scandal.
As Wall Street on Parade explains:
“Unlike the Inspector General of the U.S. Department of Justice, as well as more than 30 other Federal agencies, the Inspector General of the Federal Reserve is not nominated by the President of the United States and confirmed by the U.S. Senate. Instead, the Inspector General of the Federal Reserve is appointed by the ‘head’ of the Federal Reserve Board of Governors; he reports to that same Board of Governors; and he can be terminated by them with a two-thirds vote.”
On Wednesday, 5 sitting U.S. Senators sent a letter admonishing Jay Powell about the FED’s weak new trading rules. They also expressed grave concerns about the Powell FED’s lack of cooperation in the investigation of #Fedgate: “[W]e are disappointed that the Federal Reserve has refused to provide additional information regarding the full scope of the trading scandal…we also repeat our request for your cooperation with members of Congress and the Federal Reserve’s Office of the Inspector General as we seek to understand the full depth of the Fed’s trading scandal.”
On Thursday, the FED’s IG, Mark Bialek, finally released findings from his “comprehensive review” of Clarida and Powell securities trading, more than half a year after the senior FED staff trading violations came to light. It’s a three-and-a-half-page public relations fluff job that undertakes basically zero substantive analysis.
On former Fed Vice Chair Clarida, the OIG memo merely admits that Clarida “inadvertently” omitted large trades from his financial disclosure filings, but then finds Clarida handled correcting the omissions properly. Um, WTF?! That’s not even the real issue!
The report literally contains ZERO discussion or analysis of the timing of Clarida’s trades! As 5 U.S. Senators just wrote in their letter to Powell, Clarida “bought millions of dollars in stocks right before the Fed cut interest rates and announced its extraordinary market support.” And as NYT’s Jeanna Smialek further exposed: Clarida’s “corrected disclosures show that Vice Chair Richard H. Clarida [also] sold a stock fund, then swiftly repurchased it before a big Fed announcement.” Well, Mr. Bialek - what say you about that?!
The farce continues in the IG analysis of Chair Powell’s trade violations. Mr. Bialek writes: “[G]iven public reporting regarding your [Powell’s] December 2019 financial transactions, we also conducted an investigation of your trading activities.” Since Occupy The Fed (and then Wall Street on Parade) were literally the only two outlets to report on Powell’s blackout trading, we guess Mr. Bialek may be one of our readers. (Hi, Mark! Hey, we get it, we wouldn’t want to have to investigate our boss either.)
Unfortunately, Mr. Bialek seems to have missed the part of our article where we exposed Powell’s FOMC blackout trading in 2015! Does the FED have a statute of limitations on trade violations? Not that we know of…but again ZERO analysis.
So what of Powell’s five blackout trades in 2019? The report awkwardly points the finger at both Chair Powell’s wife (film producer Elissa Leonard, who is perhaps best known for controversy over a wealthy DC suburb dog park) and a certain unnamed “financial advisor team.” The IG report claims that the team “had noted the blackout period on [its] calendar prior to executing the trades” on Ms. Leonard’s request, and “subsequently acknowledged that executing the trades during the blackout period was an ‘oversight’ on the team’s part.”
First of all, why does Powell’s supposedly error-prone financial advisor team get to remain anonymous at this point? More importantly, at what point did Jay Powell’s financial advisor team “acknowledge” its “oversight”? Before or after Occupy The Fed movement exposed his blackout trades? If before - why didn’t Chair Powell come clean and publicly acknowledge the trading “oversight”? If after - why wasn’t Powell reviewing the trades in his account?! Of course, Powell absolutely has full responsibility for all trading - as is clear on every Ethics Agreement he signs.
Frankly, it’s all stinks to high heaven to us. We tend to agree with former FED staff-turned-critic Danielle DiMartino Booth that “[t]here’s no such thing as ‘mistakes’ made during Fed blackout, especially for the Chair.” But even if we took the report at face value on the 2019 trades, there’s at least one massive, unresolved issue — Powell’s municipal bond trading!
Powell wants you to think this was an isolated incident. It’s not. Powell’s trading and disclosures show a clear pattern and practice of disregarding the rules and then trying to cover it up.
As we explained in detail in our first article on the scandal, Powell’s purchases of muni bonds - and subsequent approval of unprecedented purchases of muni bonds by the FED - posed a direct 18 U.S.C. § 208 conflict. When confronted about it, Powell claimed that OGE had conducted an analysis and said there was no conflict. Yet, FOIA requests for documentation of such a decision yielded zero results, see e.g. “FOIA Response Suggests Fed's Powell Was Dishonest About Personal Ethics Signoff” by Revolving Door DC.
So more serious questions remain on munis as well:
Did the FED IG investigate Powell’s muni conflict? If not, why not? If so, what were his findings? Did OGE provide an analysis of Powell’s conflict or not?
The American public deserves the answers to these questions. They also deserve to see full disclosures of all of Powell’s trade dates, as has long been required. This is especially important given the stated time limitations to the IG’s investigation.
Until these and related questions are answered, the case should not be closed on Powell’s wrongdoing. At least the others involved in the scandal like Kaplan, Rosengren and Clarida have resigned from public service. Instead, Powell is free to continue his reign of inflation terror on the American public with zero consequences.
-#OccupyTheFed
Will they face justice?
Will any of them?
Mark Bialek, inspector general for the Board and the Consumer Financial Protection Bureau, has a base salary of $350,960, set by federal law.