Elizabeth Warren Calls For SEC to Investigate Federal Reserve Officials’ Trading Activities

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Massachusetts senator says financial disclosures by Vice Chairman Richard Clarida reflect ‘atrocious decision’

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The third official, Mr. Clarida, moved between $1 million and $5 million into one mutual fund and two other funds on February 27, 2020, a statement issued by Fed Chairman Jerome Powell indicating a potential interest-rate It was a day before. Cuts due to concerns over the budding pandemic.

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The SEC did not immediately respond to a request for comment.

In testimony before Congress on September 28, Mr. Powell promised to reform Fed policies on how its leaders manage individual investments to reduce the presence of conflicts of interest. He acknowledged that the rules by M/s Kaplan and Rosengren allowing trading are not sufficient to maintain public confidence, even though they appear to meet the existing protocols of each bank.

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“We now understand that we need to revise our practices, and we are in the process of making ideas and recommendations for the same,” he said, referring to trading activities by M/s. Kaplan and Rosengren. He did not address Mr Clarida’s financial disclosures, which were released last May and were first reported by Businesshala News on October 1.

Ms Warren asked the SEC to see to what extent any trades were affected by non-public information available to Fed policymakers and whether they violated provisions prohibiting such transactions.

Ms Warren wrote in her letter, the business activities of the three men “reflect the brutal judgment of these officers.” Regarding Mr Clarida, he wrote, “there is no justifiable ethical or financial rationale for him or any other government official to be involved in these dubious market conspiracies, while having access to non-public information and decision-making authority.” have an extraordinary effect on the markets and the economy.”

Unlike M/s Kaplan and Rosengren, Mr. Clarida was not actively trading in individual securities. Mutual funds or exchange-traded funds are baskets of stocks, bonds, or other securities. Mr. Clarida disclosed a total of five transactions last year on two dates – one in late February and the other in early August.

In trades on February 27, 2020, Mr. Clarida sold a bond fund and bought equal amounts of assets in two stock funds. In the last week of February, the financial markets started a period of heavy volatility, with stocks falling and bonds rising.

Mr Clarida’s calendar is shown on February 27, 2020, he talks with a Fed board member at 4:45 pm. Mr. Powell took the unusual step of issuing a statement on February 28, 2020, saying the Fed “will take appropriate action to support the economy”, indicating a possible interest rate cut.

A Fed spokesman said in a statement that Mr Clarida’s 2020 transactions “represent a pre-planned rebalancing of his accounts” that reflected similar activity to what he reported in April 2019. “The transaction was executed prior to engaging in deliberations on the Federal Reserve’s action to respond. Not during the coronavirus emergency and blackout period. The funds selected were selected with prior approval from the Board’s ethics officer.” ,” said the spokesperson.

Ms Warren introduced legislation last year that would bar senior government officials from trading individual shares. Mr. Clarida’s activities will not be held back by those proposed additional restrictions.

FHN Financial’s chief economist Chris Low said in a note to clients on Monday, the activity “appears to be exactly like that of autopilot trading public officials”. “Unfortunately for Clarida… timing, coincidence or not, stinks.”

Controversy over Fed officials’ financial disclosures is heating up at the same time the White House weighs in on whether to reappoint Mr. Powell or nominate someone else as his successor after his four-year run as chairman. The term ends in early February. Mr Powell was recently seen as the frontrunner for reappointment. Fed Governor Lyle Brainard, who is the central bank’s point person overseeing the Reserve Banks, is another top contender for the job.

Ms Warren did not address the business case with Mr Powell at last week’s hearing, where she heavily criticized her record on bank regulation and said she would be willing to serve if President Biden nominate her for a second term as chairman. Will vote against his confirmation. Mr. Powell’s efforts to loosen financial regulations imposed after the 2008 crisis “makes you a dangerous man to lead the Fed,” he told him last week.

Nick Timiros and [email protected]

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