Fed Chairman Orders Ethics Review After Regional Bank Presidents Disclose Making Multimillion Trades During Pandemic

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Federal Reserve Chairman Jerome Powell on Thursday ordered a review of the central bank’s ethics rules after top officials last week disclosed making multimillion-dollar stock trades during the Covid-19 pandemic.

“Because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission, Chair Powell late last week directed board staff to take a fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials,” a Fed spokesman said in an afternoon statement to media.

The announcement came after Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren revealed in disclosures last week that they bought and sold stocks and assets linked to real estate last year even as the Fed contemplated measures to prop up the economy with historic stimulus measures. Both officials said they would divest after criticism of their disclosures.

“While my financial transactions conducted during my years as Dallas Fed president have complied with the Federal Reserve’s ethics rules, to avoid even the appearance of any conflict of interest, I have decided to change my personal investment practices,” Kaplan said in a statement.

Kaplan said he traded stock in Apple, Amazon, Boeing, and Google parent-company Alphabet, while Rosengren invested in real estate. The revelations prompted a letter to the Fed’s 12 regional bank presidents from Sen. Elizabeth Warren (D-MA), who raised the specter that decisions about monetary policy may have been influenced by personal investments.

“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 …[is] making money for himself in the stock market,'” Warren wrote.

The Fed spokesman said Thursday the review would aim to “tighten rules and standards,” and assured the board would “make changes, as appropriate,” to the Reserve Bank Code of Conduct.

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