Fed Chair Tactfully Schools Rep. Maxine Waters on 'Corporate Greed' Allegations

(CNSNews.com) – Some Democrats, including President Joe Biden, have suggested that corporate greed or profiteering is driving inflation in this country.

Rep. Maxine Waters (D-Calif.) is one of them, telling a congressional hearing on Thursday: “Corporate greed and consolidation are driving higher and higher prices for consumers, above and beyond any inflationary pressures.”

While there may be “competition issues” in some industries, it’s not the Federal Reserve’s job to investigate those issues, Fed Chair Jerome Powell told Waters at a hearing of the House Financial Services Committee.

Waters, the committee chair, asked Powell, “Could you elaborate on the role that corporations play in setting prices, and how that is affecting inflationary pressures today? Would you also elaborate on what you meant when you said, perhaps corporations are raising prices, quote, ‘because they can?'”

“Sure,” Powell responded:


“So matters of concentration in the economy represent a series of interesting questions that are largely not settled. For — for one thing, it is clear that our economy has become more concentrated, largely due to lower levels of formation of smaller businesses. That has happened. It is not at all clear that there is a connection between — between a more concentrated economy and, for example, inflation.

“And, of course, matters of corporate concentration are outside the jurisdiction of the Fed. We really — those are for the — for the competition authorities and really not for us to — to discuss. In terms of what’s — why prices are going up, I think a lot of it has been — a lot of the places where prices have gone up quite a bit have been situations where supply is constrained and demand is very strong.

“And so take cars, for example. The demand for cars went up a great deal during the pandemic. People wanted to ride in cars rather than public transportation, and they wanted to move to the suburbs and things like that. Rates were low. The economy was stronger than — than people expected.

“But the companies couldn’t really make more cars, because they couldn’t raise their output because of the lack of semiconductors.

“So when — when demand hits fixed supply, what happens is prices go up, and margins went up. And so I think as the economy returns to normal, we would expect those profit margins to return to more normal levels.”

Waters attacked Tyson Foods, suggesting that price gouging — not rising labor and freight costs – is behind Tyson’s higher prices and corporate profits:

“I’m not familiar with their — with their profit and loss statement,” Powell said. “But I will say — and again, there may be particular industries where there are competition issues. I don’t know that. It’s really not our focus or our authority.”

(Tyson Foods has rejected accusations that higher meat prices result from “industry consolidation or scale,” blaming what it calls “unprecedented market conditions.”)

Waters pressed Powell: “Well, do you have the opportunity to look at rising costs and identify corporations where they are gaining substantial profits, yet they keep raising their prices? Do you have a way of — of examining that?”

“I think we can see that, but I think — you know, our job is to keep, you know, maximum employment and price stability. So we’re not — we’re not in the business of regulating individual companies or determining whether their actions, for example, are anti-competitive or that sort of thing. That’s more for elected people and also for the competition authorities,” Powell said.

“So we do look at that and — but again, I think a great deal of the price increases that you saw were — were a matter of supply being unable to meet demand, and the result was prices moving up. In many cases, that was the story.”

Windfall profits tax?

Later in the hearing, Rep. Alexandria Ocasio-Cortez (D-N.Y.) asked Powell if “using anti-trust laws against companies that are raising their prices” would lower inflation.

“It’s hard to say really,” Powell responded.

“Would subjecting those companies to a windfall profits tax have a potential impact on inflation?” Ocasio-Cortez followed up. “And would requiring government contractors to keep a lid on their pricing have certain impacts on inflation?” she asked.

“You know, there’s a long history of price controls when inflation has been high, and it wasn’t — it was not a successful one. Really, really, it comes down to getting demand and supply in alignment,” Powell responded.

Throughout the hearing, Powell explained that the Fed’s intention “is to bring down inflation while keeping the labor market strong.”

In his opening statement to the committee, Powell noted that the Fed has raised interest rates at each of their past three meetings, by a total of 1.5 percentage points.

“The Committee reiterated that it anticipates that ongoing increases in the target range will be appropriate,” Powell said. “Financial conditions have been tightening since last fall and have now tightened significantly, reflecting both policy actions that we have already taken and anticipated actions.

“Over coming months, we will be looking for compelling evidence that inflation is moving down consistent, with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate. The pace of those changes will continue to depend — continue to depend on the incoming data and the evolving outlook for the economy.

“We will make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as possible.”

Powell noted that the economy “often evolves in unexpected ways.”

“Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook, and we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time.

“We’re highly attentive to inflation risks and determined to take the measures necessary to restore price stability. The American economy is very strong and well-positioned to handle tighter monetary policy. To conclude, we understand that our actions affect communities, families, and businesses across the country.”


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