Jerome Powell, the chair of the Federal Reserve Banks is to spend the next three days answering to the elected in Washington.
Starting tomorrow in the morning, then on Wednesday, to conclude on Thursday with the Senate Banking Committee chaired by Mr Crapo.
That follows last Thursday’s speech which got a bad reaction from the market because he basically said there’s nothing he can do for mainstreet.
He can’t target different groups. He can’t order the banks to pass on these zero percent interest rates. They can only lend to solvent business. They like making good loans. And the classic: this is the law.
The constitution of the United States says only gold and silver can be legal tender, showing there are many laws one can pick and choose depending on their real intention.
Their real intention being lending to the government is very profitable because you know they’ll pay it back, so it’s basically free money for the banks which get 6% of Fed’s profits.
As much Powell says even explicitly, arguing that targeting different groups or addressing inequality and the rest is for Mr Trump not Powell.
That’s because Powell says he has to go through banks which are getting some $120 billion a month with some $80 billion going into bonds and $40 billion into buying packaged mortgages.
Banks therefore must be making quite a lot in profits as they get a cut through borrowing cheaply and lending slightly less cheaply where it concerns gov.
Where it concerns the real economy, borrowing is almost impossible for many, and interest rates usually are very high, certainly compared to the near zero percent that banks get charged.
If all this money is not flowing to the economy, then the temporary problems may be compounded, hence now this grilling.
The Treasury Secretary Steven Muchin will be with him, so the two most powerful men in the country after Trump where the economy is concerned, are now to explain how they plan to get the engine going again to stable growth.
A difficult task and an impossible one if they shut down the economy again, with it unclear whether they’ll manage to reassure the market that they have a plan and that they’re not out of ammo.
