In April the Department of Justice dropped a criminal probe into Federal Reserve Chair Jerome Powell. The case was unusual because it involved politics.

In an article from the Associated Press, the politics is relatively simple, President Trump believes the US should have lower interest rates, but the Federal Reserve, an independent body which sets the interest rate, said no because some of the President’s policies have tended to push up inflation rather than lower it. The President decided or the Department of Justice decided that rather than cost of renovating the building the Federal Reserve is expanding to has increased, and the buck stops with the Chair. The Inspector General has examined the cost overruns and anytime a building is being renovated rather than built brand new, there is the possibility of higher costs due to unforeseen building conditions. The building had a number of conditions such as needing new foundations because of the water table. For a smaller building, it was okay but for a larger office building, need foundations were needed. There were a variety of other issues.

Everyone in Washington could see the President’s motives, but one Senator who is not running for re-election decided to hold up the nomination for the new Federal Reserve Chair until the lawsuit by the Department of Justice was dropped. The Senator is Senator Thom Tillis and during the nomination hearing outlined his reasons for not casting his vote for the new Chair Kevin Warsh.

Incidentally, the last time Mr., Warsh was on the Federal Reserve Board, but not the Chair when the US economy has declining or near recession in 2008, he voted for measures to fight inflation. Often times the Federal Reserve tries to do a balance between fighting inflation and encouraging economic growth or higher employment.

Back to the courtroom, a prosecutor handling the Powell case conceded at a closed-door court hearing in March the government had not found any evidence of a crime, and a judge subsequently quashed subpoenas issued to the Federal Reserve. The witch hunt by the President had no teeth and the Federal Reserve’s independence was strengthened.

On May 15th, Jerome Powell will end his scheduled term and Mr. Warsh will become Chair of the Federal Reserve.

Linking to dividend paying stocks, one of the tools in all companies is the legal system, sometimes companies sue because they can and have the ability to pay the lawyers to allow better negotiations. The other side may not have the resources to sue so they tend to settle and allow the larger company to maintain its competitive advantage. The large companies tend to have the ear of the government and sometimes can delay decisions which can be an advantage to the company. Most of us do not get sued very often, so we react that normal people react, but large companies have legal departments to both defend themselves and act as aggressors to maintain competitive advantage.

There are more questions than answers, till the next time – to raising questions.