Powell opens investment rule review for Fed policymakers

(Bloomberg) – Federal Reserve Chairman Jerome Powell has ordered a “new and comprehensive” review of the central bank’s ethics rules regarding financial assets and activities authorized by senior Fed officials.

“This review will help identify ways to further strengthen these rules and standards,” a Fed spokeswoman said in a statement Thursday. “The board will make changes, if necessary, and any changes will be added to the reserve bank’s code of conduct. “

Powell gave the order late last week, the Fed said. The move follows revelations about investment and trade earlier in the week by two of the senior central bank officials who critics say have shown the need for increased accountability and oversight of the Fed.

Boston Fed Chairman Eric Rosengren and Robert Kaplan of Dallas announced on September 9 that they would both sell their individual stocks by September 30, in a bid to allay ethical concerns after their activity trade last year raised questions.

Both said their transactions were in line with the Fed’s ethical guidelines and that they acted to avoid even the appearance of any conflict of interest. But critics say the situation should never have happened in the first place.

“This controversy over asset trading by senior Fed staff shows why it is necessary to ban the ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” Elizabeth said. Warren, Democratic Senator from Massachusetts, in a statement. Thusday.

“Regional Fed leaders must prohibit the ownership and trading of individual shares by senior officials, and impose strong and enforceable financial ethics and conflict of interest rules on themselves and their staff to restore confidence from the public, ”she said.

The Fed noted in its statement that its rules on the personal financial practices of Fed officials are the same as those of other government agencies, and that it also has an additional set of rules “more stringent than those that apply. in Congress “.

Rosengren and Kaplan’s business activities – revealed in annual disclosures filed by the 12 regional Fed chairmen – come at a time when the Fed is already under fire from some quarters for aggressive political actions during the pandemic that have driven it up. asset prices, disproportionately benefiting the wealthiest Americans.

The disclosure from Kaplan, a former senior executive at Goldman Sachs Group Inc., shows that among several deals over $ 1 million in his portfolio, he bought and sold the iShares Floating Rate Bond ETF, which tracks the level of bonds with less than five years to maturity. , and would be influenced by the Fed’s rate policies and projections.

Rosengren’s disclosure listed interests in four separate real estate investment trusts and listed several purchases and sales of these and other securities. These investments raised eyebrows because he publicly warned of the risks of commercial real estate.

(Updates with Warren calling for an ethics overhaul in the sixth paragraph.)

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