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Did Two Fed Presidents Really Resign…or Were They Pushed Out?
What happens when you threaten trillions in GDP.
In the past few days, two Federal Reserve Presidents suddenly resigned their posts:
- Robert Kaplan of the Dallas Federal Reserve
- Eric Rosengren of the Boston Federal Reserve
The given reason is a controversy that they made large stock trades during the pandemic, at a time when they wielded inordinate power over the economy and the stock market.
The real reason is that they were both hawkish on interest rates, looking to raise them in 2022.
The Economy Hates High Interest Rates
After the Great Recession, in addition to dropping the Effective Federal Funds Rate to 0%, the Federal Reserve began purchasing assets in its quantitative easing program. This sent 10-year Treasury rates plummeting, making loans and other credit-fueled financial activity much cheaper.
However, the Federal Reserve knows that it’s job is “to take away the punch bowl just as the party gets going.” Then-Federal Reserve President Ben Bernanke announced his intent to start to think about reducing the $85 billion in monthly asset purchases in May 2013.
