Most Americans likely assume that Jerome Powell, the Chairman of the Federal Reserve, is an economist, like the prior chairs of the Fed over the past 40 years. He’s not. Powell is a former investment banker at the Wall Street firm, Dillon Read; a former partner at the controversial private equity and leveraged buyout firm, the Carlyle Group, which has spent over $1 billion over the past decade lobbying the federal government; and a former lawyer at Davis Polk, a Big Law firm that played a key role advising the government and Treasury in the 2008 Wall Street bailout.
Powell’s background would be strange enough but now consider this. The Vice Chairman for Supervision at the Fed, Randal Quarles, who is in charge of supervising the largest and most dangerous Wall Street bank holding companies in the U.S., has an uncannily similar background to Powell. Quarles also worked previously at Davis Polk and the Carlyle Group. (Powell and Quarles are also good friends, according to Senator Elizabeth Warren.)
Both men were well schooled in leveraged buyouts before coming to the Fed. Both men are now involved in what is effectively levering up $454 billion of taxpayers’ money provided to the Fed under the recently passed CARES Act into a $4.5 trillion leveraged buyout fund of toxic debt from Wall Street banks. After taxpayers’ take the first $454 billion in losses on those purchases, the remainder may be sold off to private investors. If this sounds to you like a set-up on behalf of the one percent, it should.
Powell is a member of that one percent class. According to his 2019 financial disclosure, his net worth could run as high as $55 million. Much of his investments are with Goldman Sachs (a Wall Street bank that is supervised by the Fed) or with BlackRock and its iShares Exchange Traded Funds (ETFs). The government mandated financial disclosures report investment values in a range. The upper value of Powell’s holdings with BlackRock is $11.6 million. The upper range of Powell’s holdings with Goldman Sachs is $16.55 million. The name Goldman Sachs has been shortened to “GS” in the disclosure document.
These would appear to be large conflicts of interest. BlackRock has been selected to manage the unprecedented buying of both investment grade and junk bonds on behalf of the Fed to the tune of approximately $750 billion according to the most recent term sheet from the Fed. Even more conflicted, the Fed will allow BlackRock to buy up its own sinking junk bond ETFs using taxpayer and Fed money. (See here and here.)
Here’s another thing you likely don’t know about Fed Chairman Jerome Powell. Some of the smartest, most respected Senate Democrats did not vote in favor of confirming Powell for the job of Fed Chairman. Those included Senator Richard Blumenthal of Connecticut; Senator Cory Booker of New Jersey; Senator Kirsten Gillibrand of New York; Senator Kamala Harris of California; Senator Ed Markey of Massachusetts; Senator Jeff Merkley of Oregon; Senator Bernie Sanders of Vermont; and Senator Elizabeth Warren of Massachusetts.
From the Senate floor on January 23, 2018, Senator Elizabeth Warren said this about why she would not vote in favor of Powell for Fed Chairman:
“I am deeply concerned that as soon as Governor Powell unpacks his boxes in the Chairman’s office, he will begin weakening the new rules Congress and the Fed put in place after the 2008 financial crisis. And he will have help: right down the hall will be his ‘close friend,’ Randal Quarles, the Fed’s new Vice Chair for Supervision. Governor Powell told me when we met that he intended to rely a lot on Vice Chair Quarles on regulatory issues.
“That is a really dangerous prospect. Before coming to the Fed, Vice Chair Quarles spent more than a decade in private equity, where he made his mark arguing for weaker rules on big banks. And he’s gotten a running start now that he’s at the Fed. In a speech a few weeks ago at his old private equity firm, Quarles announced that he was working on reducing capital standards for Wall Street banks, weakening the Volcker rule, and making stress tests easier for big banks to pass — in other words, he’s already set up his to-do list to gut measures put in place after the financial crisis that are there to try to keep our economy safer.
“So Governor Powell says he will take his cues from a guy who wants to get rid of as many rules as he can and take the teeth out of the rules that he can’t. No thank you. That will make American families less safe. It will make the American economy less safe.
“And to make matters worse, Powell’s gifts to the giant banks will come at a time when banks of all sizes made gigantic profits last year and got giant tax giveaways in the bill that was passed in December. Good grief — when will enough be enough for these guys? But even with banks rolling in money, the army of lobbyists and executives have come back, storming Capitol Hill and the halls of the Fed, spinning this story that financial rules are throttling them and need to be cut back.”