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Powell orders an ethical review after a multi-million dollar deal of senior officials

Federal Reserve Board Chairman Jerome Powell testified at a hearing of the Senate Banking Housing and Cities Commission on the “Semi-Annual Monetary Policy Report to Congress” held at Capitol Hill, Washington, on July 15, 2021. To do.

Kevin Lamarck | Reuters

Federal Reserve Board Chairman Jerome Powell said after a senior central bank official had traded millions of dollars in stock in 2020 while others had made significant investments. Instructed staff to consider the Central Bank’s ethical rules for proper financial activity.

The document released last week was published by the Federal Reserve Bank of Dallas. Robert Kaplan has made multiple transactions worth over $ 1 million Last year, with individual stocks such as Apple, Amazon, and Delta Air Lines.

Richmond Fed President Thomas Barkin, a former senior executive at consulting firm McKinsey & Company, has disclosed several financial holdings in excess of $ 1 million.

His investments included Coca-Cola shares of $ 500,000 and less than $ 1 million and other industry-based funds managed by external investment companies.

Birkin’s largest holding was over $ 1 million and included various exchange-traded funds supervised by external managers. For example, he held at least $ 1 million worth of shares in Vanguard’s Energy Fund Admiral Share, an investment trust that invests in energy companies such as ConocoPhillips, Marathon Oil Company, and BP.

Boston Fed President Eric Rosengren has invested in the purchase and sale of several real estate-owned vehicles similar to the four real estate investment trusts, according to Filing. He also held shares in Pfizer, Chevron and AT & T. His investment ranged from tens of thousands to hundreds of thousands of dollars.

Even the emergence of interests in the Federal Reserve can be a problem for institutions whose mission is to monitor US employment and inflation fairly.

“Because the trust of the American people is essential for the Federal Reserve Board to effectively carry out our important mission, Chair Powell told the Board staff late last week by the Federal Reserve Board. He has instructed a new comprehensive review of the ethical rules regarding acceptable financial holdings and activities. Officials. “

“This review helps identify ways to further strengthen these rules and standards,” they added. “The Board of Directors makes changes as needed, and the changes are added to the Reserve Bank Code of Conduct.”

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Given the Fed’s important role in managing the US economy and its impact on interest rates and liquidity markets, the transaction was quickly scrutinized. The Covid-19 pandemic and the subsequent recession expanded the Fed’s power in 2020. Congress, with the approval of the Treasury, will allow the Fed to undertake a wide range of emergency lending measures to cash out the economy in an emergency.

Rosengren and Kaplan are presidents of two of the Fed’s 12 regional banks across the country. The governor of the local bank takes turns as a member of the Federal Open Market Committee, which sets the interest rate policy, the Fed’s policy-making body.

In the face of public opposition, Kaplan and Rosengren agreed to sell their holdings.

Robert Kaplan in Jackson Hall, Wyoming

David A. Grogan | CNBC

The news of Powell’s investigation came when Senator Elizabeth Warren (Massachusetts) sent 12 letters to the Federal Reserve’s regional bank governor, demanding strict ethics from the country’s central bank’s top executives. I did.

Specifically, Warren called on the Federal Reserve Board to enact a ban on the ownership and trading of individual shares by senior officials in each regional office. All letters dated September 15 were similar to the following letters, with the exception of two to Kaplan and Rosengren.

“When the Fed took extraordinary action to address the economic and banking and financial system risks of the COVID-19 pandemic, you and your colleague Eric Rosengren were big on individual stocks and real estate investment trusts. We made a big deal, “Warren wrote to her in a letter to Kaplan.

The deal “raised concerns about conflicts of interest among senior officials with widespread policy-making influence and extraordinary access to economic information,” she added.

The Federal Reserve Board has played a leading role in the US economic recovery from the worst coronavirus recession.

Economists say their political independence allowed them to move faster than Congress, and monthly purchases of US debt and mortgage-backed securities helped keep the myriad of businesses that plunged last year.

Powell orders an ethical review after a multi-million dollar deal of senior officials

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