Powell orders ethics review after top executives trade millions of dollars

Powell orders ethics review after top executives trade millions of dollars

Federal Reserve Chairman Jerome Powell testifies before the Senate Committee on Banking, Housing and Urban Affairs during the “Semi-Annual Monetary Policy Report to Congress” hearing on Capitol Hill in Washington on July 15, 2021.

Kevin Lamarck | Reuters

Federal Reserve Chairman Jerome Powell last week called on employees to review central bank ethics rules for fair financial activities after a senior central bank official traded several multi-million stocks dollars in 2020, while others have made significant investments.

Documents released last week showed Dallas Fed Chairman Robert Kaplan made several trades last year in individual stocks, including Apple, Amazon and Delta Airlines, worth $ 1 million. dollars or more.

Richmond Fed Chairman Thomas Barkin, a former senior executive at consulting firm McKinsey & Company, disclosed financial assets of more than $ 1 million.

According to the file, Boston Fed Chairman Eric Rosengren has been involved in four real estate investment trusts and several purchases and sales of vehicles owned by similar assets. He also held shares in Pfizer, Chevron and AT&T. Its investments ranged from several tens to several hundreds of thousands of dollars.

Even the presence of auto-operations at the Fed could prove problematic for an institution charged with impartial oversight of US employment and inflation.

“Since the trust of the American people is essential for the Federal Reserve to effectively fulfill our important mission, President Powell last weekend asked board staff to discuss ethical rules regarding financial assets. and activities authorized by the Fed. directed to examine new and broader authorities, ”a Fed spokesperson told CNBC.

“This review will help identify ways to further strengthen these rules and standards,” he said. “The board will make the necessary changes, and any changes will be added to the Reserve Bank’s code of conduct.”

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Trade quickly came under scrutiny given the Fed’s key role in managing the US economy, as well as its impact on interest rates and liquidity markets. The COVID-19 pandemic and subsequent recession increased the power of the Fed in 2020. Congress authorized the Fed, with Treasury Department approval, to introduce a wide range of emergency lending measures to provide the economy with liquidity in an emergency.

Rosengren and Kaplan are the chairmen of two of the Fed’s 12 regional banks across the country. The presidents of regional banks in turn sit on the Federal Open Market Committee, which sets rate policy, the governing body of the Fed.

Amid public backlash, Kaplan and Rosengren agreed to sell their individual shares.

Robert Kaplan in Jackson Hole, Wyoming

David A. Grogan | CNBC

News of the Powell inquiry came after Senator Elizabeth Warren, D-Mass., Sent 12 letters to the presidents of regional Fed banks demanding strict ethics from the country’s top central bank officials .

Specifically, Warren called on every Fed chairman to ban the ownership and trading of individual stocks by senior officials in each regional office. Each letter, all dated September 15, was identical to the next except for two addressed to Kaplan and Rosengren.

“As the Fed takes extraordinary steps to address the risks to the economy, banking and financial systems from the COVID-19 pandemic, you and your colleague Eric Rosengren have expanded trading in individual stocks and trusts real estate investment, ”Warren told him. . Wrote a letter to Kaplan.

The trade, he said, “has raised concerns about conflicts of interest among senior officials with far-reaching political implications and exceptional access to information on the economy.”

The Fed has played a leading role in the US economic recovery from the worst of the coronavirus downturn.

Economists say its political independence has allowed it to go faster than Congress, and monthly purchases of $ 120 billion of U.S. debt and mortgage-backed securities have helped support countless companies that did business last year. had influenced.

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