Date: September 21st, 2021 2:56 PM
Author: Exhilarant jet nursing home sound barrier
Two advocacy groups said two senior Federal Reserve officials who traded stocks and other investments while setting monetary policy should lose their jobs, while a former senior Fed adviser said one of the men should be fired and the other should take leave pending an investigation.
Federal Reserve Bank of Dallas President Robert Kaplan Federal Reserve Bank of Boston leader Eric Rosengren actively traded in markets in 2020, a year dominated by major Fed interventions to help save the economy during the coronavirus pandemic, according to financial disclosure forms recently made available by their banks. The Fed said after the disclosures it would review its rules around trading rules by officials.
Better Markets, a group that pushes for tighter financial regulation; the left-leaning Center for Popular Democracy’s Fed Up campaign; and Andrew Levin, a former top Federal Reserve staff member and now a professor at Dartmouth College, are calling for the Fed to take action against Messrs. Kaplan and Rosengren.
“It’s time for the Fed to do what leaders are supposed to do: Lead by example,” Better Markets president and chief executive officer Dennis Kelleher wrote in a letter sent to Fed Chairman Jerome Powell Tuesday.
Referring to what he called the “pandemic profiteering trading conduct” of Messrs. Kaplan and Rosengren, both should resign or be fired “for having lost the confidence and trust of the American people and, one would think, the Chairman of the U.S. central bank,” Mr. Kelleher said.
Mr. Kelleher said that as a regulator of financial institutions that has weighed in publicly about improving Wall Street culture, the Fed must live by those same standards.
“This is no time for the American people to lose confidence and trust in the Fed, which must be above reproach, not set the lowest bar for ethical and legal conduct,” Mr. Kelleher wrote.
Dartmouth’s Mr. Levin said, “President Rosengren should immediately resign or be removed from office” and “President Kaplan should take administrative leave pending the outcome of an external investigation of his trading activities.” The academic also worked at the central bank as special adviser to the Board on monetary policy strategy and communication from 2010 to 2012.
Mr. Levin said that in the case of Mr. Rosengren, trading securities tied to real estate even as these investments were directly affected by the Fed’s actions to help support the financial sector last year was egregious.
In the case of Mr. Kaplan, more information is needed, Mr. Levin said. The Dallas Fed leader, who worked for two decades at investment bank Goldman Sachs Group Inc. before leaving in 2006, has so far declined to provide full information on when and how much he traded across a wide variety of securities, some of which were in investments directly impacted by Fed policy choices, such as interest-rate and stock-market future funds.
“An external investigation can examine the timing of Kaplan’s stock transactions and determine whether those transactions could have benefited from his access to confidential market-sensitive information,” Mr. Levin said.
Both the Dallas Fed and the Boston Fed have said the trading undertaken by both men was in line with internal bank rules that prevent Fed leaders from owning stocks in banks and from trading around meetings of the Federal Open Market Committee meetings.
The trading by Messrs. Kaplan and Rosengren stood out among Fed officials’ disclosure forms, which showed varying levels of personal wealth and asset holdings. Mr. Kaplan’s trading, which totaled many millions of dollars going back to when he started at the bank in 2015, dwarfed that of Mr. Rosengren, who has spent most of his working life at the Fed.
Some Fed watchers say the trading raises questions about who policy was designed to help. “There are a lot of reasons that working people are right to wonder if the Fed has their best interests in mind,” said Benjamin Dulchin, campaign director for Fed Up.
“These trades are only the most obvious reason, but it makes it harder for the Fed to do its job,” Mr. Dulchin said, adding if he were Mr. Kaplan or Mr. Rosengren, “I would resign.”
The Dallas and Boston Fed leaders said after the disclosure of their trading that they would sell all their stock holdings and move the money into cash or investment funds by the end of September. Meanwhile, the Federal Reserve Board said it would review the rules that govern senior officials’ financial activities and make changes as it saw fit. A Fed representative cited this review in response to questions about the Better Markets letter.
“We operate under rules about what we’re allowed to trade and when we’re allowed to trade it, precisely because we don’t want to have the appearance of, you know, looking like we’re trading on inside information,” Cleveland Fed leader Loretta Mester told reporters on Sept. 10. When it comes to updating the Fed’s internal rules, she said “I wouldn’t have a problem” with taking a fresh look at what is allowed.
But the Better Markets group says the Fed’s plan is insufficient. In a letter to Mr. Powell sent on Sunday, before the group said the two officials should be fired, Better Markets called on the Fed for full disclosure of all aspects of trading by officials and senior staff and said the Justice Department, the Securities and Exchange Commission and the Fed’s Inspector General all need to “conduct thorough investigations of all such trading to determine whether any laws were broken.”
(http://www.autoadmit.com/thread.php?thread_id=4925926&forum_id=2#43153289)