Fed vice chair to resign over stock trading controversy
Federal Reserve vice chairman Richard Clarida said on Monday that he would resign two weeks before his term expires, following new revelations about his stock trading on the eve of a major central bank announcement in early 2020.
Clarida, 64, will leave the Fed’s Board of Governors on Jan 14, ahead of the expiration of his term as governor on Jan 31, according to a letter to President Joe Biden, who picked Fed governor Lael Brainard as vice chairman in November.
The missive made no mention of
Clarida’s trading.
His unexpected early departure — in the shadow of an ethics scandal that engulfed the Fed last year — follows reports last week that Clarida had sold at least $1 million of shares in a US stock fund in February 2020 before buying a similar amount of the same fund a few days later.
The following day, chairman Jerome Powell signaled the central bank was preparing aggressive action to buffer the economy and financial markets from the coronavirus.
While the purchase transaction was previously disclosed and reported by Bloomberg News in October, the sale of the fund shares was first included in an amended financial-disclosure form filed with the government last month.
“Rich’s contributions to our monetary policy deliberations, and his leadership of the Fed’s first-ever public review of our monetary policy framework, will leave a lasting impact in the field of central banking,” Powell said in a statement on Monday.
The course catalogue at Columbia University, where Clarida is a professor, showed him listed as teaching there again this semester.
Last autumn, two regional Fed chiefs announced their departures following revelations about their trading activity. One of the presidents, Eric Rosengren of Boston, said his resignation was due to a serious health condition.
Powell announced new investment guidelines in October, including banning purchases or sales during periods of market stress.
A probe of Fed trading is under way by the central bank’s inspector general, which declined to comment on whether Clarida is part of the investigation.
The resignation will raise questions about the scope of the inspector general’s investigation and controls around ethics rules, even though the Fed has revised them.
A Fed ethics officer, in a letter attached to Clarida’s amended filing, said the vice chairman was “in compliance” with laws and regulations regarding conflicts of interest.
“It is a really big stretch for the ethics officers to be defending these transactions,” said Kaleb Nygaard, senior research associate at the Yale Programme on Financial Stability. “This is an issue of public confidence.”
A Fed spokeswoman declined to comment beyond the ethics officer’s letter appended to Clarida’s amended disclosure.
Clarida has been a member of the board and vice chairman since September 2018.
Roberto Perli, a former Fed economist and partner at Cornerstone Macro LLC, said he believed the vice chairman’s stock-trading activity was in good faith, but it leaves an aura of suspicion around his motives.
“I don’t know if that’s the reason for his early resignation, but if it is, Clarida did the right thing for the good of the institution, as anyone would expect of him,” Perli said. “I wouldn’t discount the possibility that he left for other reasons. The last few weeks at the Fed are more a formality than anything else.”