• Eugene Puryear

The Snowballing Scandal At The Fed: Insider Trading, and With No Consequences

Updated: Oct 23, 2021

The following is a lightly edited transcription from The Punch Out with Eugene Puryear, a daily news podcast that comes out Monday through Friday, 5pm ET. Subscribe here.

The Federal Reserve Board is embroiled in a growing scandal over what certainly looks like insider trading by its top officials as well as the cozy relationship between those same officials and the mega-banks that run the financial system. That scandal now leads all the way up to Federal Reserve Chairman Jerome Powell himself who, as reported in the American Prospect, sold somewhere between $1 million and $5 million from a fund of stocks he owned, right before the stock market took a dip in the fall of 2020.

According to an examination of the records by Prospect journalist Robert Kuttner, Powell’s sell-off happened on October 1, 2020, right in the middle of a huge controversy over the passing of a COVID relief bill that, at the time, was being resisted by Trump.

Readers may remember that there were all sorts of dire warnings that as COVID seemed set to get worse going into last winter, and that the economy could essentially fall off a cliff if there was not another relief bill passed. In fact, the Federal Reserve itself noted in the late September 2020 meeting of its Open Markets Committee:

“Participants continued to see the uncertainty surrounding the economic outlook as very elevated, with the path of the economy highly dependent on the course of the virus; on how individuals, businesses, and public officials responded to it; and on the effectiveness of public health measures to address it. Participants cited several downside risks that could threaten the recovery.” These included insufficient fiscal stimulus and excessive risk-taking in a very-low-interest-rate environment created by the Fed itself.”

This is notable because it demonstrates that the Fed itself was worried that without a relief bill these uncertainties could have big negative impacts on the economy. These notes were not made public until October 7, a week after Powell sold millions of dollars of stock.

Further, on October 1, 2020, the same day Powell’s stock sales were processed, Powell spoke with Treasury Secretary Steve Mnuchin four different times. On October 6, 2020, Powell gave a speech warning that failure to enact a relief bill would be very bad — the same day Trump announced he had instructed his team to stop negotiations on a relief bill.


So, now, take a step back and think about this. Powell has more information than any other person, probably on earth, about the U.S. and the global economy as Federal Reserve chair. Just a couple weeks before he made his moves to put millions in his bank account, he and the other top Fed officials, had just had a whole conversation about how there was a good chance the stock market could take a hit. And then Powell was directly talking to Mnuchin, presumably whether or not the Trump administration was going to support a relief bill, and on that same day he sold $1 million to $5 million in stock.

Now we don’t have a smoking gun as proof here but I can’t be the only one thinking this looks pretty clearly to be in the realm of insider trading. Powell would have known if a relief package was coming, and decided to sell millions in stock to make sure he got maximum value out of his investments; what makes this “insider” is that much of the information he was operating off of was not available to the public.

With that being said, the Fed has essentially no rules governing insider trading by its high officials so it's not that likely that Powell broke any actual laws, although possible. Whatever the legality, it looks like he was trading on secret knowledge for private gain. This doesn’t exonerate Powell, so much as it indicts the managers of the U.S. financial and monetary system.

When asked about Dallas Fed chair Robert Kaplan's dodgy trades, Powell said he hadn’t been paying close attention to the disclosures that revealed them. It makes sense now that he wouldn’t want to look too close, since he doesn’t look great in the same documents.

On that note Kaplan, and Boston Fed President Eric Rosengrens have been forced into early retirement because of their trades in and out of positions in the stock and real estate market that seem almost certainly to have been trading on their knowledge for personal gain. They are still being investigated by the Fed’s Inspector General. Meanwhile, Fed Vice Chair Richard Clarida has come under fire for also doing millions in trades close to a major announcement by the Fed that directly impacted the market.

On top of all that, as Wall Street on Parade reported, Atlanta Fed President Raphael Bostic appears to have gotten special treatment from an elite private bank owned by JPMorgan. He seems to have been given access to exclusive perks for millionaires, despite not being one himself.

All this raises another issue: many of these scandals also involve the very banks the Fed oversees directly and has deep relationships with. The overall picture painted is one of serious conflicts of interest and self-dealing, directly violating the Fed’s stated mission of serving the public. Now, anyone who knows the history of the Fed knows they are essentially a cipher for the economic views and desires of Wall Street. These scandals continue to add to the evidence, now in the personages of the Fed’s very top leadership.