Fed Chairman Jerome Powell testifies before Senate Banking Committee


Elizabeth McLaughlin, Staff


Chairman of the Federal Reserve Jerome Powell listens during a hearing before the Senate Banking Committee in December 2020.

On Tuesday, Feb. 23 at 11 a.m. EST, the chair of the Federal Reserve, Jerome Powell, testified before the Senate Banking Committee regarding the central bank’s semi-annual Monetary Policy Report. The Committee’s chair, Senator Sherrod Brown (D-OH) began the session with opening remarks about the current state of economic affairs. Senator Brown made it clear from the beginning that he is in favor of the Fed using any monetary tools it sees fit to manage inflation and unemployment, stating, “most people are not worried about doing too much to get through this pandemic, they’re worried about doing too little.” Further, he recalled remarks from Janet Yellen, the treasury secretary, who stated that if the Fed doesn’t do more by way of monetary policy, we risk a “permanent scarring” of our economy and our future.

Ranking member Senator Pat Toomey (R-PA) disagreed with Senator Brown, stating, “the last thing we need is a massive multimillion-dollar spending bill.” Senator Toomey was chiefly concerned with inflation and urged Powell to roll back the Fed’s holdings of treasury securities and agency mortgage-backed securities in order to avoid uncontrollable and unwanted inflation. Senator Toomey stated that most American households are in better financial positions now than they were before the pandemic. He stated that in his opinion, the last two recessions were caused by asset bubbles that burst. In 2001, it was the stock market, in 2008, the mortgage credit market. Additionally, Senator Toomey believes that monetary policy contributed a great deal to the formation of those bubbles. 

He also remarked that there is a link between record amounts of liquidity and unprecedented asset valuations, like those of GameStop and Bitcoin, as of late. Across the board, Senator Toomey stated, there are elevated asset prices and signs of emerging inflation. He asked Powell if he believes there is a link between the liquidity the Fed has been providing and some of these unprecedented asset prices, to which Powell responded, “there is certainly a link.” Despite this, Powell and the Fed plan to continue the bond-buying program “at least at its current pace until we make substantial progress toward our current goals.”

Powell presented his testimony in two parts: a review of the current economic situation and the Fed’s plans for monetary policy moving forward. Powell stated that the sectors most adversely affected by the resurgence of the virus are the weakest. Household spending on services remains low, especially in the hard-hit sectors of leisure and hospitality. However, household spending on goods picked up in January. Moreover, the housing sector has “more than fully recovered from the downturn.” Regarding the labor market, Powell stated that the pace of improvement in the labor market has slowed and the unemployment rate remained elevated at 6.8 percent in January. Participation in the labor market is notably below pre-pandemic levels. 

Moreover, Powell stated that “those least able to shoulder the burden [of the pandemic] have been hardest hit,” citing low wage workers, African Americans, Hispanics and other minority groups as the most affected. During the questioning portion of the hearing, Senator Bob Menendez (D-NJ) explained the varying unemployment rates by race: in January, the unemployment rate among the black population was 9.2 percent; among Hispanics, 8.6 percent. The unemployment rate among white people was 5.7 percent. Additionally, the Black labor force exit rate increased dramatically while the white labor force exit rate returned to pre-pandemic levels, suggesting that the Black unemployment rate is misleadingly low compared to the white rate. Senator Menendez got Powell to agree that minority families are bearing the brunt of the damage caused by the pandemic, “along with those at the lower end of the income spectrum.”

Regarding inflation, Powell stated that there were large declines in the spring, but consumer prices partially rebounded last year. Powell also stated that as the very low inflation readings from last March and April drop out of the 12-month calculation on inflation, we should expect readings on inflation to move up. This is called the base effect and it should not be a cause for concern. Powell mentioned that overall, inflation remains below the 2 percent long-run objective. He stressed that the 2 percent goal is an average, so periods of lower-than-average inflation should be followed by periods with inflation rates greater than 2 percent.

In his overview of the monetary policy report, Powell emphasized that maximum employment is a broad and inclusive goal, so policy decisions should be informed by an assessment of the shortfalls of employment from its maximum level, rather than deviations from its maximum level. Furthermore, Powell mentioned that actions taken by the Fed in the early months of the pandemic have constrained their main policy tool by the lower bound. In other words, the Fed has been lowering interest rates in unprecedented ways since even before the start of the pandemic, so their ability to use lowering interest rates as a monetary policy tool is weakened.

If lowering interest rates isn’t really much of an option anymore, what will the Fed do? Simply put, the Fed will do what it has been doing throughout the pandemic: increase holdings of securities at least at their current pace. The Fed will closely monitor inflation; Powell stated that “well-anchored inflation expectations will enhance our ability to meet both our employment and inflation goals.” Powell assured Congress that the Fed “will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases.”


La Salle alumni changing the field of fintech


Michael D’Angelo, Staff


The website, financialprofessional.com, a platform developed by two La Salle University alumni, is a new and upcoming company in the financial technology industry.

Here at the Collegian, we love stories which highlight the success of La Salle alumni and how they make a difference in the world around them. Two La Salle alumni, Alan Angeloni, ‘18, and current graduate student Nicholas Dingler, ‘20, are shaking up the financial technology (fintech) industry with their new website.

Angeloni was a finance major at La Salle with a focus in investment analysis and served as vice president of the Investment Club for two years. As an undergrad, Dingler was an integrated science, business and technology major and is currently pursuing an MBA in finance. The website includes various articles and tools centered around personal finance and investing. I had the privilege to catch up with Alan and Nick, where I asked them some questions centering around FinPro, the fintech industry and the financial markets.  Catch the full interview below below. 

Collegian: How did you both come up with the idea for FinPro? 

We started FinPro in 2018 — Alan’s senior year and Nick’s sophomore year of college — as we were in the same fraternity. At the time, we just wanted to spread financial literacy and share what we had been learning at school, in our free time about the markets on social media. We soon came to the realization that these social platforms were here to stay and were replacing traditional media outlets at a rapid pace. We wanted to be where the attention was and where there would be in a future.

We saw that financial firms at the time were avoiding growing audiences on social media due to compliance issues. So, we moved aggressively into social media. We currently have an Instagram page with over 800,000 followers, a TikTok page with over 16,000 followers, and since the launch of our investment marketplace in December, we have matched over 1000 people with investment firms and have over 50,000 monthly readers on our website. 

Collegian: What is the future of the FinTech industry and the financial services industry in your opinion?

Simplicity and accessibility are everything for the technology industry. Traditional institutions are struggling to keep up with the rapid growth of neobanks (online or digital banks), robo-advisors and payment processors, given how fast tech-enabled companies can pivot and add new features on the fly. 

Collegian: What is FinPro’s mission and culture? 

Our mission is to find the right investment for our users. Our culture fosters innovation and creative thinking. We love having an open dialog with all of our team members. If you don’t like something, speak up. We’re here to offer the best product and services for our users. Our stakeholders should be comfortable enough saying to either of us, “This looks terrible, we should be doing this, why aren’t we doing this, have you thought about this,” etc.

How do you think FinPro can change the financial sector?

By fostering transparency, accessibility, and knowledge. One big issue with the financial services industry is that there isn’t a whole lot of transparency on what exactly these firms are doing with your money, how they are profiting with your money and what risks are involved. We strive to make all of these points clear while also showcasing the opportunities that people have access to. We seek to further educate them on these financial products, so that there is no room for misconception.

Collegian: What is the future of FinPro and what do the both of you have in mind? 

We plan to increase our suite of financial tools to help individuals make financial decisions and boost our content production efforts to further spread financial literacy.

Collegian: What do you think about the market right now? Are equities overvalued or undervalued?

It really comes down to each specific sector, but it can be quite difficult to justify some valuations in certain industries. We currently see an abundance of opportunities in the alternative space given the vast attention the equities market has received over the past year. Luckily, the Robinhood effect is occurring within the alternatives industry and it’s never been easier to get exposure to alternative assets. We are currently living in a time where regulations are being lifted to give retail investors access to the same opportunities institutional investors have received for decades. 


Zambia a proving ground in Africa’s debt crisis


Bill O’Brien, Editor

The Economist

Zambia’s debt negotiations with China have largely been behind closed doors, garnering distrust among Zambia’s retail investors.

Last week the Collegian covered the ongoing debt crisis in Africa that has been fueled by Chinese loans, which make up about a third of debt loads in numerous key struggling countries. Chinese lending practices have been judged differently across the board, with U.S. officials calling out the Chinese government for a practice called “debt-trap diplomacy,” a foreign policy strategy in which a lending nation uses looming default on debt to seize strategic assets from the borrowing nation as collateral. Others reject that theory, citing that China lacks a history for seizing assets over debt defaults but rather provides relief and restructuring options to the nations they lent to. For some nations, that debt crisis is coming to a heel. Zambia, a nation that owes a third of its debt to China, is currently in talks with holders of $3 billion worth of Zambian eurobonds. Zambia has already stated that, unless it is granted an interest payment holiday, a request that will be voted on next week by its eurobond holders, it will not be able to service its bonds. A core group of the eurobond holders have already rejected the proposal.

Owing a third of its debt to China, Zambia will undoubtedly have to address how it is going to service its loans from the economic superpower. With about a dozen other nations in talks with China for debt relief, Zambia will be a testing ground, setting a precedent for how future debt negotiations may go. A key part of Zambia’s debt management strategy is to garner relief from the World Bank and the IMF, organizations that have already begun working to stabilize the African debt crisis but fear their efforts may not be enough. The World Bank has already called for an additional $25 billion in relief funding for the world’s poorest nations on top of a debt-relief initiative the Group of 20 just renewed.

To make matters worse, Zambia has been running into roadblocks earning the good faith of their eurobond holders. They have isolated their talks with China, and conducted negotiations with the People’s Republic behind closed doors, spurring distrust of its retail lenders. Its eurobond holders and retail investors are concerned that China is seeking to gain more favorable loan restructuring terms in closed negotiations and have expressed extreme caution in coming to terms with a deal until China comes to the table with them.

In the next couple of months, Zambia will be heavily reliant on relief coming from organizations like the G20, World Bank and the IMF, and they will have to strike a deal with their debt holders before their inevitable default. Conducting transparent talks with China will be key to earning the good faith of their retail bondholders, including the eurobond holders that vote next week on whether to give Zambia an interest payment holiday.