Fed Chair Jerome Powell says his conflicts on interests are being managed “extremely carefully”
Federal Reserve Chair Powell wants you to know that instead of avoiding or eliminating conflicts of interest, he's decided to manage them.
BlackRock, which manages about $7 trillion in assets, was hired by the Fed in March to steer tens of billions of dollars in bond purchases as part of the U.S. central bank’s efforts to stabilize the bond market amid the economic turmoil caused by the coronavirus pandemic.
BlackRock’s own ETFs accounted for a large share of corporate bond ETFs it bought on behalf of the Fed as part of the central bank’s relief program. BlackRock waived asset management fees on ETFs purchased on behalf of the Fed.
“BlackRock is just our agent,” Powell said at his virtual news conference following the close of the Fed’s two-day meeting, in response to a reporter’s question on the handling of potential conflicts of interests. “We make the policy decisions in conjunction with our colleagues and they just execute our plans.”
“I think their conflicts are managed extremely carefully in the contractual arrangement that we have with them,” Powell said.
It's not just that the Fed hired BlackRock to buy ETFs that BlackRock created. There's also the lack of transparency.
Federal Reserve Chairman Jerome Powell and Randal Quarles, the Vice Chairman for Supervision at the Fed, have stated in testimony before Congress that they would be providing transaction level details of their Section 13(3) Emergency Lending Facilities on a regular, ongoing basis. But the three oldest of those facilities, the Primary Dealer Credit Facility (PDCF), the Commercial Paper Funding Facility (CPFF), and the Money Market Mutual Fund Liquidity Facility (MMLF), which were all created more than four months ago in mid-March, have yet to release any transaction level details to the public.
BlackRock was hired by the Fed to manage the assets of the PDCF, and the don't think it necessary to report what they're doing.
Corruption? What corruption? If there is any corruption going on here, it is being managed.
Earlier this year, Wall Street On Parade reported that the Chairman of the Federal Reserve, Jerome Powell, had an upward range of $11.6 million invested with the investment management firm, BlackRock, and its iShares Exchange Traded Funds, according to Powell’s 2019 financial disclosure form.
Powell’s 2020 financial disclosure form is now available. It was signed by Powell on May 15, 2020 and it shows that Powell’s holdings in BlackRock investments have reached an upward range of $24.95 million – an increase of $13.35 million over the prior year’s upward range.
There's nothing suspicious about a 120%+ return on investment in just five months with a company that's getting no-bid trillion dollar contracts.
One more thing: The Reuters article that quoted Powell, didn't include his very next sentence.
And again, I would have — I can’t recall exactly what those conversations were, but they would have been about what he is seeing in the markets and things like that to generally exchanging information. And he’s typically trying to make sure that we are getting good service from the company that he founded and leads. I’d say that’s his main objective when we talk.”
The most dangerous section of Powell’s explanation is the phrase “exchanging information.” The Chairman of the Federal Reserve sits on a pile of market-moving information and is expressly forbidden from “exchanging information” with a Wall Street investment manager if it is inside information. That’s why any phone calls of this nature are problematic and raise serious red flags.
Looks managed to me.