Central Banker Stock Trades Reviewed

After regional Fed presidents made trades that gained widespread attention and generated calls for a ban on such transactions, the standards for Federal Reserve officials may become more stringent. Chairman Jerome Powell of the Federal Reserve has ordered a review of the central Banker policies to see if any changes are required, according to the Fed. As the Federal Reserve’s ability to effectively carry out its important mission depends on the American people’s trust, Chair Powell directed Board staff late last week to take a fresh and comprehensive look at the ethics rules governing permissible financial holdings and activities by senior Fed officials.

This analysis will aid in identifying ways to tighten those norms and standards even more. As needed, the Board will make adjustments, which will be incorporated into the Reserve Banker Code of Conduct. According to recent reports from the Fed’s dozen regional Banker presidents, Dallas Fed President Robert Kaplan made many $1 million stock trades last year, and Boston Fed President Eric Rosengren acquired and sold assets, including multiple Real Estate Investment Trust transactions.

Neither Kaplan nor Rosengren broke the Fed’s rules in their ownership or trading, but they both indicated that they would sell their individual assets to avoid any perception of impropriety after their disclosures caused the institution to receive negative news. Other regional Fed presidents had large holdings as well, but did not trade last year. The main standards that regulate Federal Reserve officials’ personal financial practices are the same as those that govern other government institutions. We also have a set of supplemental regulations that apply to the Federal Reserve and are stricter than those that apply to Congress and other agencies. These rules are particular to the work we conduct at the Fed.

This financial activity has sparked concerns about conflicts of interest among high-level officials with broad policymaking authority and unprecedented access to economic data, prompting questions about Fed officials”self-dealing,’ concerns that ‘Fed presidents had access to information that could have benefited their personal trading,’ and perceptions that ‘a guy who inflicted damage on the economy’. She wrote, “This financial activity has prompted concerns about conflicts of interest among high-level officials with far-reaching policymaking influence and extraordinary access to information about the economy, raising questions about ‘self-dealing’ by Fed officials, concerns ‘that Fed presidents had access to information that could have benefited their personal trading,’ and perceptions that ‘a guy who influences monetary policy.”