Federal Reserve Announces Ethics Investigation After Regional Officials’ Trades

Federal Reserve Board Chairman Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee in Washington on July 15, 2021. Win McNamee/Getty Images

Federal Reserve Chairman Jerome Powell directed officials in the central bank to investigate reports of stock trades made by leaders at the Fed’s branches in Dallas and Boston last year.

“This review will assist in identifying ways to further tighten those rules and standards. The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct,” a Federal Reserve spokesperson said in a statement obtained by The Epoch Times.

“The core rules that guide personal financial practices for Federal Reserve officials are the same as those for other government agencies. We also have a set of supplemental rules that are stricter than those that apply to Congress and other agencies that are specific to the work we do at the Federal Reserve,” the statement added.

Powell last week told staff at the Federal Reserve to “take a fresh and comprehensive look at the ethics rules” about holdings and other financial activities by senior officials.

“This review will assist in identifying ways to further tighten those rules and standards,“ it added. ”The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”

A report from the Wall Street Journal earlier this month found that Dallas President Robert Kaplan traded stocks in companies including Apple Inc., Alibaba Group Holding Ltd., and Amazon.com Inc. last year that reached into the seven-figure range. Boston President Eric Rosengren, the paper reported, made several real-estate investments in 2020.

Both bank presidents have issued statements that their trades and investments complied with the Fed’s ethics rules and will later divest their assets.

“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, according to the WSJ report.

Rosengren issued a similar statement: “It is extremely important to me to avoid even the appearance of a conflict of interest, and I believe these steps will achieve that.”

The Federal Reserve’s investigation announcement comes after Sen. Elizabeth Warren (D-Mass.) sent letters (pdf) to all 12 regional Fed bank presidents and called on them to stop trading individual stocks, citing Kaplan and Rosengren.

“The controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” she argued.