This article is based on TheStreet’s Stock & Markets Podcast. Hosted by Chris Versace, veteran Wall Street investor and lead portfolio manager for TheStreet Pro, these weekly podcasts are available early to members of TheStreet Pro investing club.
If anyone has ever called you a sock puppet, you can be sure they didn’t mean it as a compliment.
The term is used to describe someone who uses a false identity, often online, to deceive others, and those very words came up during the Jan. 13 edition of TheStreetPro’s Stocks & Markets Podcast.
The phrase came amid heightened political pressure on the Federal Reserve, as investors weigh whether the central bank can maintain its independence.
Chris Versace, lead manager for TheStreet Pro Portfolio and podcast host, asked Bob Lang, market technician and TheStreet Pro contributor, for his thoughts about a federal investigation into Federal Reserve Chairman Jerome Powell.
Powell said the U.S. Department of Justice had served the central bank with subpoenas and threatened it with a criminal indictment over his testimony this summer about the Fed’s building renovations.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said in a two-minute video posted on the Fed’s website on Jan. 11.
TheStreet Pro’s Bob Lang shares his thoughts about the Federal Reserve.
Fed Chair working for American people
President Donald Trump said the subpoenas have nothing to do with his views on interest rates, but he has consistently pressured the Fed to cut rates aggressively, while Powell has defended the Fed’s independence in making rate decisions based on economic conditions.
Trump has described Powell as “a very stupid person” and “low IQ” and accused the Fed Chair of costing the U.S. “trillions of dollars” by keeping interest rates too high.
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“He’s billions of dollars over budget,” Trump said, according to CNBC. “So, he either is incompetent or he’s crooked. I don’t know what he is. But he does a—certainly he doesn’t do a very good job.”
Trump nominated Powell as Fed Chair in 2017, succeeding Janet Yellen, and was later renominated for a second term by President Joe Biden in 2021.
Powell was first appointed to the Fed’s Board of Governors in 2012 by President Barack Obama.
“I personally think it’s a lot of noise,” Versace said. “I think Powell is going to remain the straight shooter that he is.”
“I agree 100%,” Lang said. “And frankly, you know, he’s got a job to do. He’s doing work for the American people. He’s going to stay there until May and do his thing. He’s not going to be deterred by anything that any politician has to say about him.”
Related: Jerome Powell’s net worth, salary & job as Fed Chair
Powell has done a great job for almost eight years, running the Fed through the Covid-19 pandemic, Lang added.
“And look, it’s not an infallible group,” he said. “They have a lot of opinions and views and it’s a smaller version of what happens in Congress. You’ve got a lot of people with a lot of different views representing a lot of different factions and regions, and it’s no different in the FOMC.”
The investigation has sparked bipartisan condemnation, and a group of former Fed chairs, Treasury secretaries, and prominent economists, including Alan Greenspan, Ben Bernanke, and Janet Yellen, issued a joint statement stating that the inquiry was “an unprecedented attempt to use prosecutorial attacks to undermine” the Fed’s independence.
Concerns about political influence on Fed
“I think folks try to read too much sometimes into what Powell has to say,” Versace said. “I think the simplest thing to do is just listen to what he says. He does a very good job of laying it out and telling you what they’re watching and what we as investors need to pay attention to. But do you think he stays on as governor?”
“I think he’s moving on,” Lang said. “He’s had experience in the private sector. He’s been working for private equity firms before. He’s a lawyer. So, I think that he’s moving on to do other things.”
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As to who he would like to see replace Powell as Fed Chair, Lang cited former Fed governor Kevin Warsh.
“He was there during the financial crisis,” he said. “So, he has some experience with dealing with those sorts of disasters. I think Kevin Warsh would be a great chairperson. He understands the independence of the Fed is extremely important.”
Kevin Hassett, a conservative economist and key Trump economic adviser, is seen as a top contender to succeed Powell.
“I’m not really sure about his experience with people on the committee and whether there’s going to be too much influence on him from President Trump,” Lang said.
“We’ve already seen that happen with Stephen Miran, who’s a new appointee on the (FOMC) committee, and he seems to be voicing an opinion of President Trump.”
“Are you calling him a sock puppet?” Versace asked.
“Sure,” Lang said, after a slight pause.
The two men discussed the possibility of interest rate cuts this year, and Lang noted that for the market to go up, “it’s the perception of the committee leaning in that direction that matters more than what they actually do.”
“I don’t see us going as far down as 150 basis points more, but I do see cuts happening before we have to raise rates again,” he said.
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