FOR IMMEDIATE RELEASE
Contact: Max Moran, moran@therevolvingdoorproject.org
On September 22, Federal Reserve Chairman Jerome Powell told reporters that he’d received sign-off from the Office of Government Ethics (OGE) to run the Fed’s Municipal Liquidity Facility (MLF) despite owning municipal bonds himself. Powell told CNBC’s Steve Liesman that “it was a real coincidence, I happened to pre-own these munis. They were bought many years ago, actually.”
However, Powell neglected to mention that he’d personally purchased shares that year in several actively-managed municipal bond funds, as a Revolving Door Project review of the Fed Chair and Vice Chairs’ 2020 financial disclosure forms shows. While it’s true that Powell did not purchase or sell individual municipal bonds last year, he made multiple purchases of shares in Goldman Sachs’ High Yield Municipal Fund, and Goldman Sachs’ Short Duration Tax Free Fund, for an estimated value total of $15,000 – $50,000 each. Both of these are actively-managed funds focused on municipal bond investments.
Powell’s family trusts also invested in both funds. The Powell Family Trusts #1 and #4 each purchased shares worth $1,001 – $15,000 in GS High Yield Municipal Fund. The Powell Family Trust #1 purchased $15,000 – $50,000 worth of shares in GS Short Duration Tax Free Fund. Finally, the Powell Family Trust #3 purchased $1,001 – $15,000 worth of shares in GS Short Duration Tax Free Fund.
It could create “even the appearance of a conflict of interest” for Powell to purchase positions in any fund which invests in markets the Fed backstopped — and, as Liesman pointed out, the Fed’s code of conduct forbids trades which create “even the appearance of a conflict of interest.”
However, it is particularly questionable for Powell to purchase stakes in two actively-managed funds. Powell and his family’s trustees evidently had a high opinion of the judgments of these traders, regarding a market in which Powell’s MLF was actively (and rightly) interceding. We also do not know when Powell or his family trusts made these purchases; the “Date” field on the disclosure forms is blank. It is unclear why these dates have been omitted. Notably, former Federal Reserve Bank of Dallas President Robert Kaplan also omitted dates of his S&P 500 stocks and futures transactions, which has prompted scrutiny.
We encourage reporters to ask Powell and the Federal Reserve any or all of the following questions:
- Will you confirm that Chair Powell corresponded with the Office of Government Ethics when he purchased positions in Goldman Sachs’ High Yield Municipal Fund and Goldman Sachs’ Short Duration Tax Free Fund, and received OGE signoff? If this correspondence took place, will you release documents proving it?
- Will you release documents regarding Chair Powell’s correspondence with the Office of Government Ethics which shows it saw and approved of his decision to lead Municipal Lending Facility despite his municipal bond holdings? If this correspondence did not take place, why not? If there is no written record of OGE recommendations, why not? Lawyers like Powell typically request written sign off before engaging in an activity for which they sought a form of dispensation or clearance.
- Will Chair Powell release the dates of his purchases of positions in Goldman Sachs’ High Yield Municipal Fund and Goldman Sachs’ Short Duration Tax Free Fund?
- Has the Fed updated its ethics review practices since former Richmond Bank President Jeffrey Lacker resigned after leaking market-moving materials to a Wall Street newsletter in 2017? How did ethics review practices for bank presidents’ reappointment not include a thorough examination of their financial holdings and transactions?
A transcript of the relevant portions of the Sept. 22 CNBC news conference is linked here. The Revolving Door Project’s prior writings about Powell and the Federal Reserve can be seen here.
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