U.S. Sen. Sherrod Brown (D-OH), along with several other Senate Democrats, introduced a bill that would prohibit Federal Reserve officials from trading individual stocks.
The Ban Conflicted Trading at the Fed Act would prohibit Federal Reserve Board Governors and Reserve Bank Presidents and Vice Presidents from trading individual stocks. Instead, they could invest in diversified mutual funds, investment trusts, and U.S. treasuries. It would also require Federal Reserve officials to divest individual holdings within six months after enactment of the bill – or face fines. Federal Reserve Bank Presidents, Vice Presidents, and Directors would be required to make the same public annual and periodic financial disclosures as Federal Reserve Governors, and they would be subject to the same penalties for violation of these requirements. In addition, the bill would ensure that the Federal Reserve implements the rules for Federal Reserve policymakers and senior staff, announced on October 21, to guard against conflicts of interest.
“Public officials, whether at the Fed or in Congress, must serve the American people – not their own stock portfolios,” Brown, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, said. “Our bill will ensure that Fed officials cannot buy and trade stocks, and there will be financial penalties if they don’t comply. The American people need to be able to trust that the Federal Reserve works for them and that officials aren’t abusing their positions for personal gain.”
The bill was brought on by the news of recent stock trades made by two Federal Reserve Bank Presidents.
“It’s common sense—Federal Reserve officials should not be trading stocks while setting U.S. economic policy. The Ban Conflicted Trading at the Fed Act would extend STOCK Act financial disclosure requirements and penalties to Federal Reserve Bank leadership, bars Federal Reserve officials from trading individual stocks, penalizes them if they do so, and, most importantly, will give the American people confidence that the Federal Reserve is acting solely for the national interest,” Sen. Kirsten Gillibrand (D-NY), one of the bill’s sponsors, said.
Sens. Jeff Merkley (D-OR) and Raphael Warnock (D-GA) are also co-sponsors on the bill.
“Public officials who seek to profit by trading stocks with the advantage of non-public information, or who have the conflict of making policy decisions that could decrease or increase the value of their portfolios, are betraying the public trust,” Merkley said. “This is wrong and must be banned.”