Federal Reserve Chair Jerome Powell sold between $1 million and $5 million worth of stock just before a large stock market crash last year, according to new disclosure filings reviewed by The American Prospect.
Powell’s massive sale came on October 1, 2020. As the month went on, the Dow Jones Industrial average dropped nearly 6 percent, or by 1,600 points — the largest drop since March of 2020. COVID was beginning to spike in October after a short lull in cases in the summer and early fall.
Powell had communicated with Treasury Secretary Steve Mnuchin four times on the day of the sale, The American Prospect found. Five days later, he said in a speech that, if the second stimulus bill being considered by Congress at the time were to fail, the consequent exacerbation of inequality “would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”
The same day as Powell’s speech, Donald Trump tweeted that he told Republicans to stop negotiating the stimulus package, saying that they should delay its passage until after he won the election — which, of course, never happened. The Dow, which was up at the time, fell 376 points after Trump’s tweet.
The day after the tweet, on October 7, the minutes of a crucial Fed policy meeting that was held in mid-September were released. The meeting addressed uncertainty around the financial markets and discussed issues that could threaten the markets.
The embattled Fed chair is worth between $20 million and $55 million, according to his financial disclosure from last year. Though it’s unclear if his October stock trade broke any laws, Powell’s trade is only one of many Fed scandals over the past few months. Lawmakers and legal experts have said that such sales can erode the public’s trust in the government, regardless of the legality.
As Fed chair, Powell not only has an enormous amount of insider knowledge about the financial markets in the U.S. but also has sway over the laws governing those markets. He has faced scrutiny from lawmakers like Sen. Elizabeth Warren (D-Massachusetts), who has called him a “dangerous man” because of his record with being soft on banks.
The Fed has faced an onslaught of criticism in the wake of other scandals involving stock trades by important Fed officials. In September, local Fed presidents of two major cities were revealed to have traded significant amounts of stocks and real estate-related assets last year, as the markets were being riled by the pandemic. The Dallas Fed President Robert S. Kaplan made nearly two dozen stock trades worth $1 million or more during that time, including in companies directly affected by the pandemic like Johnson and Johnson and oil and gas companies.
This month, another scandal rocked the Fed: on February 27, 2020, the agency’s vice chair, Richard Clarida, moved between $1 million and $5 million in stocks. The day after, Powell made a statement about policy changes that the agency was planning to put in place for the pandemic.
Though the Fed said it was launching an internal review of Clarida’s trades, Warren called for more, writing in a letter to the head of the Securities and Exchange Commission that all top Fed officials should be investigated for potential insider trading. She has previously introduced legislation to ban members of Congress, judges and top government officials, including Fed officials, from being able to trade stocks at all.
Warren and progressive lawmakers have criticized Powell and recommended against his reappointment, which is being considered by the Biden administration. Earlier this month, Warren slammed Powell over the Fed scandals that emerged in September and early October. “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and to protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet,” she said, adding that Powell has “failed” at preventing a “culture of corruption.”
In August, Representatives Alexandria Ocasio-Cortez (D-New York) and Rashida Tlaib (D-Michigan) urged Biden to find a new Fed chair, saying that Powell hasn’t taken enough steps to address the climate crisis and the risk that it poses to the financial sector. “At a time when the Intergovernmental Panel on Climate Change is warning of the potential catastrophic and irreversible damage inflicted by a changing climate, we need a leader at the helm that will take bold and decisive action to eliminate climate risk,” they wrote.
