If investors want to learn something about their own monetary strategy, what could be more obvious than a glance at the custodian of the money keeper. Anyone who floods the markets with money, runs interest rates, and lounges with bankers needs to know what investments are worthwhile. The ideas of the powerful central banking elite are therefore of the greatest interest to many private investors. The very personal monetary guide of local central bankers is now found in a bundle of documents from US regional central banks. In many lines, boxes and crosses, central bankers had to disclose what papers they were betting on. There, investors get an in-depth look at the financial condition of the money keepers. Some would say: Glimpses of the shallows.
Instead of discussing A for bond purchases to Z for interest, the current central bank meeting is likely to be overshadowed by a scandal: Some regional Fed central bankers held millions of shares during the Corona crash – and sometimes even actively negotiated them. Even Fed Chairman Jerome Powell had access to documents that could have benefited from the central bank’s support measures. This case is neither more nor less about the most important word in the world of central banks: independence.
For example, the president of the Fed’s regional unit in Richmond, Thomas Barkin, held corporate bonds worth millions. He’d bet more than a million dollars each on beverage maker Pepsi, hardware chain Home Depot, or pharmaceutical company Eli Lilly. Spicy: The US Federal Reserve itself started buying corporate bonds last year – for a whopping $ 46.5 billion, including Pepsi and Home Depot. Stock market broadcaster CNBC first reported these events.
But the allegations extend to the top of the U.S. Federal Reserve: Even in a bank account Fed Chairman Jerome Powell had access to, U.S. municipal bonds numbered in the millions. The principle is simple: investors borrow money from municipalities through bonds and earn interest. Bonds from Baltimore County, Denver, State of Maryland and New York were found on the account in question. However, experts know that the US Federal Reserve supplied this municipal bond market with more than $ 5 billion last year.
Investor advocates reacted with shock in their initial statements
With Fed Chairman Powell, however, the issue is not as clear-cut as with the other central bankers involved: Municipal bonds aren’t necessarily seen as a source of income, but rather boring, interest-bearing paper. To assume that Powell has an excessive speculative interest in these positions seems questionable. Additionally, the papers were already in the affected account before the Corona crash – and were not moved last year. Conversely, it might even have seemed odd if Powell had organized the sale of the newspapers. Experts could then have assumed that he was selling his insider knowledge of the economic situation or, worse yet, that he believed in a collapse of municipalities.
It’s hard to believe that Powell really needs a helping hand of any kind. The Washington Post estimated his fortune to be around $ 20 million to $ 50 million when he took office. The central banker has probably won well, especially during his tenure with investment firm Carlyle, known for its savvy business hunters. However, Powell went on to work for a Washington think tank for a salary of exactly one dollar – a year.
Investor advocates reacted with shock in their initial statements. At least some of the Fed officials have shown “scandalous activity.” “It robbed the Fed of its moral authority to want to control the biggest banks on Wall Street,” said Dennis Kelleher of the nonprofit Better Markets.
Christine Lagarde invests in an equity fund, Jens Weidmann in the MSCI World ETF – and Dax
In the meantime, several central bankers have reacted to public criticism: for example, regional Fed chairmen Robert Kaplan and Eric Rosengren have promised to sell their individual stocks no later than the end of the month and then put the corresponding money in. in liabilities investment products, which are usually one by one in a large index, follow – and are therefore a bit “boring”.
Wednesday’s US interest rate meeting was boring only at first glance. The Fed announced that it would initially leave the key rate in the low range of 0.0 to 0.25%. However, the US monetary authorities have signaled that there could be an increase as early as next year. So far, they had only aimed for a turnaround in interest rates a year later. At the same time, the Fed was preparing financial markets so that massive asset purchases could be curtailed soon, possibly in November, according to Powell. In addition, the Fed has downgraded its growth forecast for the current year in the United States, from 7 to 5.9%.
Moreover, European central bankers have adjusted their private investments to the zero interest phase: for example, the best guardian of money east of Frankfurt, Christine Lagarde, invests, among other things, in a fund of dividend-driven European equities. Bundesbank boss Jens Weidmann, meanwhile, trusts pure index funds in his wealth strategy, which follow a one-to-one stock market barometer. Some of its money follows MSCI World, which includes more than 1,600 stocks from 23 countries. And, of course, the first German Dax clue.