U.S. Sen. Elizabeth Warren (D-MA) is urging the Securities and Exchange Commission (SEC) to investigate ethically questionable transactions made by top Federal Reserve officials to determine if they violated insider trading rules.
Warren cited a recent article from Bloomberg that said Federal Reserve Vice Chair Richard Clarida traded “between $1 million and $5 million out of a bond fund into stock funds [in February 2020], one day before Chair Jerome Powell issued a statement flagging possible policy action as the pandemic worsened.”
Warren said these trades may run afoul of Fed guidelines which say officials should “avoid any dealings or other conduct that might convey even an appearance of conflict between their personal interests, the interests of the System, and the public interest.” Warren also cited recent reports that said two regional Federal Reserve Bank presidents, Robert Kaplan of the Federal Reserve Bank of Dallas and Eric Rosengren of the Federal Reserve Bank of Boston, may have made questionable stock trades in 2020.
“The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for the public trust. They also reflect atrocious judgment by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed. Mr. Clarida’s financial disclosures, for example, reveal that he is a multi-millionaire. There is no justifiable ethics or financial rationale for him or any other government official to be involved in these questionable market machinations while having access to non-public information and authority over decisions that have extraordinary impacts on markets and the economy. Finally, and most importantly from the perspective of the SEC, if these trades were based on Fed officials’ knowledge of non-public, market moving information, they may have represented potentially illegal activity,” Warren said.
Warren is urging the SEC to investigate the extent of trading activity by high-level Federal Reserve officials; the timing and rationale for these individuals’ trades; the extent to which these trades may have been influenced by non-public information in possession of the individuals making the trades; and whether these trades may have represented violations of provisions that bar individuals from “purchasing or selling a security while in possession of material nonpublic information.”
Further, Warren is calling on regional Fed leaders to adopt comprehensive ethics guidelines via her Anti-Corruption and Public Integrity Act.