Watchdog to look into Fed officials
Concerns rise about stock trading activity
WASHINGTON – An independent investigator will look into whether Federal Reserve officials broke the law with financial trades last year that have come under congressional scrutiny and sharp criticism from outside the central bank.
The Federal Reserve’s Office of the Inspector General will investigate “whether trading activity by certain senior officials was in compliance with both the relevant ethics rules and the law,” the Fed said Monday. The inspector general is an independent agency.
“We welcome this review,” the central bank said, “and will accept and take appropriate actions based on its findings.”
Last week, regional Federal Reserve bank presidents Robert Kaplan and Eric Rosengren stepped down in the wake of revelations that they engaged in extensive trading in 2020. The trading took place as the Fed was cutting its short-term interest rate to nearly zero and buying trillions of dollars of bonds to stabilize financial markets and boost the economy in the early weeks of the pandemic. Both bank presidents stood to potentially benefit financially.
Kaplan, the former president of the Dallas Federal Reserve Bank and a former partner at Goldman Sachs, traded millions of dollars of stock in 22 companies last year, including Apple, Facebook, and Chevron. Rosengren, formerly the president of the Boston Fed, invested in real estate funds that owned mortgage-backed bonds of the same type the Fed itself started buying last year.
On Friday, Bloomberg News reported that Fed Vice Chair Richard Clarida sold between $1million and $5 million of shares in a bond fund and purchased shares in two stock funds on Feb. 27, 2020, according to financial disclosure forms. The trades occurred a day before the Fed issued a statement saying it was “closely monitoring” the emerging pandemic and its economic impact.