On Unforced Errors: The Fed And UAL

Tuesday, April 11, 2017

Speaking publicly at the University of Michigan yesterday, Federal Reserve Chair Janet Yellen had some firm words for those members on Congress who are looking to pass a bill that allows for increased scrutiny of Fed policy decisions. The Chairwoman said the Fed’s independence was “under threat from Congress,” and that the U.S. is well-served with a non-partisan Fed. What Yellen seems to fear mostly is the overt politicization of the institution.

Republican Rep. Tom Massie, from the House Committee on Oversight and Reform, has pushed along a bill that increases Capitol Hill’s ability to examine the Fed’s monetary policy decisions in more or less “real time,” not with the 5-year lag at which such policies currently are made public. Even though the Fed currently publishes detailed audits of its financial activity and records and releases the minutes of its FOMC meetings a few weeks after the meetings take place, Massie’s quote from the House was, “We must end this reign of secrecy.”

Originally begun by Republican Rep. Ron Paul back in 2009, a similar measures passage in the House eventually brought President Obama to threaten to veto the measure. Obama, like many Democrats in Congress, saw potential hazards with additional scrutiny on the Fed’s policy decisions that would lead to government interference in the financial body. It is this at which Janet Yellen took direct aim yesterday.

United’s Unforced Error, Continued

In the aftermath of the PR nightmare endured by United Airlines (NYSE:UAL) following the forcible removal of a paying customer from a United flight, CEO Oscar Munoz has entered the fray to explain that the incident was all the customer’s fault, because he’d been “disruptive and belligerent” in his refusal to leave the plane of his own will. It wasn’t the fact that the company overbooked the flight in the first place — that happens — but that the passenger couldn’t find it in him to be cooperative.

The seat in question needed to go to a United employee who was required to make a connecting flight elsewhere. And when an offer of $800 was dangled in front of passengers hoping to entice a volunteer to agree to wait for another flight, United did the only thing it felt it could do: call the cops.

As a result of this principled approach, instead of finding another flight for the airline worker or sweetening the pot upward from $800 to find a volunteer, UAL and its CEO would apparently rather see their shares and future booking sales go into the tank, at least near-term. UAL shares are currently down 2.15% in today’s pre-market. Well played, sirs — especially if you happen to be shorting UAL stock!

Mark Vickery
Senior Editor

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