Happy Jobs Day to all who celebrate. This week we learned that GDP is stronger than we thought, more people want to work in America, Powell’s friends think he was vindicated because an inspector general didn’t declare him a crook, and the liberals are still worried about women getting so many jobs.
Let’s go!
Powell's 'Pass the Buck' Fed Gets a Stinging Rebuke
Remember back when Jerome Powell insisted that the Justice Department’s investigation into the Fed’s headquarters renovation was a pretext for trying to influence monetary policy? This was treated as obviously correct by the legacy financial press even though no one could explain how it was supposed to work. Why would Donald Trump or anyone else think that subpoenaing the Fed over construction would cause the Fed to alter the path of interest rates?
The inspector general of the Fed this week released its report on the renovation. As it turns out, the Fed was doing a lot of things wrong. Perhaps most importantly, the project was inadequately supervised in such a way as to allow the top Fed officials—including Powell—to avoid accountability.
The financial press bizarrely treated this as a vindication of Powell. There was nothing criminal! Powell wasn’t embezzling the funds! He was just running an organization, negligently supervising billions of dollars of construction on its headquarters. “You can’t pin the blame on top officials because they didn’t actually supervise things” is not quite the exoneration some journalists think.
Fortunately, the Fed’s new leadership read the report differently. Warsh didn’t pop the champagne corks and mock Trump for noticing something was fishy with the project. Instead, he announced serious reforms to the supervisory structure to make sure no more plausible deniability escape hatches exist. In effect, this was a stern repudiation of Powell’s supervisory practices—just as the IG report was.
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