There was a huge insider trading scandal with the Federal Reserve.
We've been talking about insider trading within Congress,
but now we're talking about the Federal Reserve as well.
Can you get the audience up to speed on what happened and
the resignations that followed as a result?
>> Yeah, so, I mean, basically in the wake of of Covid,
as the Fed was creating $4.5 trillion out of nowhere.
In a very short period of time,
which is really kinda a magical thing to be able to do.
There are no limitations in terms of how much the Fed can create or
where that money goes or strings attached to it or anything.
It's just sorta talk around what it's supposed to be doing to fight emergencies
and so forth.
And in this process, a number of Fed officials,
one of whom resigned were effectively involved in some of the specific areas.
That were most helped by this abundance of money and so is Congress.
And there's an ongoing investigations in terms of a lot of Congress people.
That had to do with the timing specifically, of not just trading or
sorta moving their portfolios around relative to.
Just the general creation of this extra money.
That was also, streaming into stock markets generally, but
also stocks that could have been impacted.
By Covid protocol or by Covid emergency funding.
And so, it's a fine line in general.
Congress, I think should not be,
trading anything when they're doing the public's business.
I mean, they can, have old potentially investments coming in.
But this was not the situation with what was going on.
It was the appearance and the actuality of trading.
And investing while, these emergency amounts of money were being created and
going into other areas.
And therefore profiting from them.
And to this day, it's still okay to do that.
>> It's insane, absolutely insane.
>> The head of the, chairman Powell did suggest,
that it would be a good idea for people defend not to basically do this.
But there was, as he was.
But whether it's active or passive and this is kinda
the irritation with this entire conflict of interest.
Is that, it's not about, I'm about to sign a bill or
I'm about to deliver a bill on the floor.
And I'm also positioned in this company and at the end, I'm gonna cash out.
Because I know this bill is gonna, sorta be passed or not or
it's gonna be talked about or not.
I don't make money out of it.
It's not about that.
It's about the fact that in general, there's a public obligation and
there's a private investment side.
And when you have a public obligation, which you've been voted to do.
And in the case of the Fed, Jerome Powell and Fed members aren't voted by people.
There voted by effectively themselves and substantiated by Congress.
But they're still involved in doing quote the public's business.
And that should not be private investing on the back of money you can create
because the actual public can't go around.
And say, all right, well, we wanna just create,
a few trillion dollars of our own to use to invest in the market.
>> So corporate stock buybacks were already a problem prior to the pandemic.
And then, more access to that cheap money, I think put,
that whole issue on overdrive.
And now we're seeing various companies,
various banks just be very transparent about.
How much they plan on even increasing their corporate stock buybacks.
What kinda impact does that have on the stock market and the inflation of assets?
Because I think it's important for
ordinary Americans who might actually have the means.
Very few of them do relative to the wealthy have the means to invest their
money.
But some of these investments are incredibly risky when you really take
into consideration.
How inflated they might be as a result of corporate stock buybacks as opposed to,
the stock.
Or the shares going up in value because of, supply and demand and all of that.
It's all disconnected from what we generally think of as economic forces.
>> Yeah, that's a good question.
And when I talk about that distortion,
that permanent distortion between the real economy and the markets.
What you're referring to at the end of what you just said is it is the real
economy.
Which should be reflected in the actual values of stock prices.
And isn't when you have an abundance of cheap money going in and
chasing some of those stocks.
It's not to say their own companies that should be valued as high as they are based
on supply and demand.
Based on their products based on their innovation.
But what it does having share buybacks be sorta your modus
operandi for inflating your own stock effectively.
Because it's cheaper to borrow money at
the levels that the Fed has prevailing right now.
And to use that money to buy stock to push their stock up.
And also money flows into stock that's inflating.
So if a company launches a big share buyback program.
Because they borrow money in order to do that, it has two things happen.
One they potentially get more into debt.
That could or could not be a problem depending on the company, but
that's just a potential weakness there.
But also money chases money, right.
And doesn't really care where money comes from once it gets into
a market environment.
And that's where the sorta stock inflation can come up.
A share buyback is followed by, other people investors,
small investors to wall street looking at.
And saying, okay, well, they're buying shares are gonna go up, we'll go in and
buy shares.
They'll go out further because you have all this money flowing into those
companies that are doing that.
But they're not necessarily chasing their own values.
So, it creates this distorted effect between real and
sorta transparent value of a company.
And the value that it gets because it has this money
sorta chasing its stock price up.
And buybacks are one sorta area from which that money comes.
>> Well, unfortunately we're running out of time and we have to wrap up soon.
But I do wanna ask one more question,
which is for people who wanna get involved, who wanna organize.
Who wanna look to policy solutions for much of what we're talking about today.
Where would you direct their attention?
Where should the focus be in terms of regulating the system in
the very least, to maybe do away with this distortion?
>> Yeah, so one thing and I mentioned it in my testimony.
And it does have to do with the ordinary investor versus the sorta leveraged wall
street using lots of cheap money.
Types of flow that's been going on, which is shareholder rights.
And one of the things that I had mentioned was,
companies like Blackrock that owns $10 trillion worth of assets.
Or other people's money is effectively able to vote those shares.
That means that they can basically push corporate policy,
which means they can push what corporations do.
And how they do it and how that impacts their workers.
And there are other kinds of employees and a whole chain of other areas,
whereas actual individual people.
If you buy a fund or
you invest a retirement amount of money in some of these ETFS exchange traded funds.
As they're called with Black Rock or other big companies, you don't have that right,
that they just took.
So they're basically using your money to impose their opinion
on the corporations that your money is going towards through them.
So, one thing that I think is really important is for
anybody that's invested in any way in the market.
Whether it's, extra money, it's a retirement, four one K, whatever.
Is to realize that money is not,
is actually getting negatively impacted by this distortion.
Because it's gonna help the big players become more powerful and
influential over corporate policy.
So, that's one thing I think in general, where do you go?
I mean there's so
many things that need to be changed in the system to make it a less distorted.
I don't see that happening, which is why I call it a permanent distortion.
There's too much money in there that's been fabricated from nothing,
over too long a period of time.
But the Fed should have limitations on what it can create.
Not just, how it fixes interest rates, but what it buys, how much it buys,
how, how quickly it creates money?
And the accountability that it doesn't have.
In terms of what happens to that money because that's really important.
$9 trillion is a substantial chunk or
equivalent to a substantial chunk almost half of our GDP.
And this is not just the Fed, this is central banks around the world.
So, I think all of those things are absolutely necessary to be changed.
There's more, but to pay attention to in the real economy or if you are a smaller.
Or sorta other form of participants in the markets are affected by them,
which we all are.
>> Nomi Prince, absolute pleasure to speak with you, thank you for being so
generous with your time.
Everyone, please check out her work.
She has, by the way, one of my favorite things to do is to just go on YouTube.
And look up anything that you've done in terms of interviews, talks,
please check that out.
Also, her upcoming book is permanent distortion,
how financial markets abandon the real economy forever.
That is due to come out October 11th of this year.
And while you're waiting for that to be released,
please check out all the presidents, bankers and collusion.
The other two books that were published by Nomi Prince.
Nomi, thank you again, I really appreciate it.
>> Thank you so much Ana.