(Yahoo!News) - Federal Reserve Chairman Jerome Powell sold as much as $5 million worth of stock just before the Dow Jones Industrial Average tanked a year ago, according to newly reviewed disclosures.
The disclosures are the latest revelation of questionable trades by members of the central bank. Although a spokesperson for Powell said his trades were approved by a government ethics watchdog, the size and timing could raise eyebrows.
"Powell made 26 trades in all in 2020, seven sales and 19 purchases," wrote the American Prospect, which first reported the disclosures. "But the October 1 trade stands out because of its size and timing."
Powell, who is believed to be worth as much as $55 million, sold between $1 million and $5 million of Vanguard Total Stock Market Index Fund shares on Oct. 1, 2020. That same month, the Dow tumbled nearly 1,600 points, about 6%, marking one of the steepest monthly drops since the coronavirus pandemic brought the country's economy to its knees.
Questionable trading and investment activity by multiple Federal Reserve presidents has led to a slew of accusations and even prompted Powell last month to announce an investigation into the matter. The rules — which prohibit senior officials from owning bank stocks, limit trading around monetary policy meetings, and warn against any activity that could suggest a conflict of interest "between their personal interests, the interest of the system, and the public interest" — are crucial to ensuring the public's trust in the U.S. central bank.
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But now, some are questioning why Powell's latest disclosure had not been previously reported. The American Prospect reported that Powell's net worth is between $20 million and $55 million and that if he needed the money, he had other investments he could tap into, including bond funds that track municipal debt, real estate, and infrastructure.
The outlet said Powell made several other smaller stock and bond trades during 2020 but that these all fell below $250,000.
The presidents of 12 regional banks participate in the Fed's private policymaking meetings, in which they discuss the central bank's interest rate policies and view economic data that are not always available to the public. The Fed's decisions can cause sharp swings in the financial markets, as can the bank presidents' speeches, comments, and actions.
Powell's October 2020 stock sale came as former President Donald Trump dragged his feet on the need for an economic stimulus package.
Meeting logs show that Powell had been in contact with former Treasury Secretary Steven Mnuchin four times on Oct. 1. Powell had been pressing the Trump administration to support more fiscal stimulus so that the sole responsibility for keeping the economy afloat would not fall on the Fed and monetary policy.
Following the sale of his stock, Powell warned in an Oct. 6 speech that failure to enact stimulus could have grave economic consequences.
"Too little support would lead to a weak recovery, creating unnecessary hardship," he said.
That same day, Trump, after meeting with Mnuchin, tweeted that he had told his representatives to stop negotiating with Democrats on a pandemic stimulus package until after the 2020 election.
"Immediately, after I win, we will pass a major stimulus bill," he tweeted.
Before Trump's tweet, the Dow had been up 200 points. Seconds after his comment, the Dow took a nosedive, ending the day down 376 points.
Congress finally passed another COVID-19 relief bill into law on Dec. 27.
The Fed did not immediately respond to a comment request from the Washington Examiner, but a spokesperson previously told the Wall Street Journal that Powell's financial transactions had been aboveboard, that he had complied with U.S. central bank rules, and that the trades had been approved by government ethics officers.
Still, the disclosures are not sitting well with some following the recent revelations that Robert Kaplan, the president of the Federal Reserve Bank of Dallas, and Eric Rosengren, president of the Federal Reserve Bank of Boston, bought and sold stocks and real estate assets as the central bank took aggressive policy action to keep the economy healthy.
Kaplan traded millions of dollars worth of individual stocks in firms such as Amazon, Chevron, Facebook, and Johnson & Johnson in 2020.
Rosengren invested in real estate investment trusts that held mortgage-backed bonds of the type the Fed itself is buying as part of its broad efforts to lower borrowing rates.
The Fed's moves likely lifted stock prices and other financial assets.
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"It is now clearly seen as not adequate in sustaining the public's trust," Powell said at a news conference after the Fed's interest rate-setting committee ended a two-day policy meeting. "We need to make changes, and we're going to do that as a consequence of this."
The controversy swirling around the Fed comes as the White House weighs whether to tap Powell for a second term. It's a decision that has become politically thorny, as liberals like Massachusetts Sen. Elizabeth Warren vow to fight against his reappointment.
Powell's four-year term ends in February. Traditionally, presidents have not changed up Fed leaders, even when a new party comes to the White House. However, the Trump administration bucked the tradition, forcing then-Chairwoman Janet Yellen out and nominating Powell in 2017.
Pre-pandemic, Powell was at the helm of an economy near full employment. The Fed raised interest rates and the ire of Trump, who frequently used Powell as a punching bag and slammed him on Twitter. Trump worried that the Fed, under Powell's leadership, would hurt his chances of reelection and slow down the economy.
The Fed chairperson is typically nominated for a second term, often to reinforce the central bank's independence from politics.
On Monday, Sen. John Kennedy, a Republican of Louisiana, told reporters Powell could be a shoo-in.
"Most people I've talked to on the Republican side support his renomination," Kennedy said. "I can't think of one person who opposes him."
By Barnini Chakraborty
