Fed policymakers’ trading to get more scrutiny

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(Businesshala) – Senator Elizabeth Warren on Monday called on the US Securities and Exchange Commission to investigate trading by top US central bankers, including two Fed Bank presidents who resigned after public outcry over their transactions .

Sen. Elizabeth Warren (D-MA) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on September 28, at the Hart Senate Office Building in Washington, DC, US. , 2021. Kevin Dietsch/Pool via Businesshala/Files

In a letter to SEC Chairman Gary Gensler, Warren cited trading by Fed Vice Chairman Richard Clarida in February 2020, shortly before Fed Chair Jerome Powell issued a warning about the risks from the coronavirus and the need for But the Fed had promised a response.

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“The reporting of this financial activity by Fed officials raises serious questions about a potential conflict of interest and reveals a disregard for public trust,” Warren wrote in a publicly released letter. “If these trades were based on Fed officials’ knowledge of non-public, market moving information, they could potentially represent illegal activity.”

An SEC spokesperson declined to comment.

The Fed began its review of ethics and trading rules last month after it was revealed that Boston Fed President Eric Rosengren traded real estate securities and Dallas Fed President Robert Kaplan sold millions of dollars worth of individual shares last year. traded while the Fed defended. The US economy and financial markets with heavy purchases of treasuries and housing-backed bonds.

Both said they followed the Fed’s trading rules.

Separately, the Fed said on Monday that it had started discussions with its inspector general’s office last week to see whether business ethics by “certain senior officials” was in compliance with rules and legislation.

“We welcome this review and will accept and take appropriate action based on its findings,” a Fed spokesperson said.

Rosengren quit his job last week, citing a kidney condition. Kaplan is due to go on vacation on Friday.

The spotlight on ethics comes at a strange time for Powell, as US President Joe Biden decides whether to reappoint him for a further four-year term or to take over the reins of the central bank starting next February. Choose someone else. Clarida’s term as vice chair also ends early next year.

Clarida’s business, reported late Friday by Businesshala News, involved selling between $1 million and $5 million of bond funds and buying the same amount of two stock funds on February 27, 2020, a day before Powell issued a statement. That said the “developing” “risk to the US economy from the pandemic.

The value of all three funds fell sharply in subsequent weeks, as the Fed slashed rates and bought bonds to cushion the blow from a government-mandated trade-off.

Today the bond index fund is trading up just as it did when Clarida sold; Since Clarida bought them, the fund indexed in shares has risen 16% and 38%, respectively.

The Fed told Businesshala that Clarida’s transaction was a “pre-planned” rebalancing and selection of funds approved by the board’s ethics officer.

Warren called Powell a “dangerous man” last week and said he would oppose his reappointment because of what he sees as the weakening of bank oversight during his tenure.

Reporting by Ann Safir and Jonelle Marte; Additional reporting by Michelle Price; Editing by Dan Grebler, Andrea Ricci and Lincoln Feast.

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