Multiple Fed officials caught in the moral vortex of stock trading Sen. Warren accused Powell of "failure"

Hu Tianjiao, a reporter for 21st Century Business Herald, comprehensively reported that a number of officials of the US Federal Reserve Board were hinted at by the country's lawmakers for personal stock trading.

While Powell waited for news from the White House for the appointment of the second Fed chairman, U.S. Democratic Senator Elizabeth Warren frequently attacked him for previous Fed officials or investments involving moral hazard.

On October 5, local time, Warren once again blamed Powell in his Senate speech, saying that the latter seemed to have failed to become an effective financial regulator and a failed leader in one decision after another.

Warren reiterated concerns about insider trading at the Fed. 2020 is a particularly important year, and the Fed has taken unprecedented steps to prop up financial markets and respond to the pandemic. In order to make specific decisions, she noted, Fed officials need access to a wealth of proprietary, non-public data and information about individual companies, economic conditions, and more. But in such cases, some Fed officials actively and frequently trade in the market, raising legitimate questions about conflicts of interest and insider trading.

Several Fed officials have recently been blamed for frequent trading. According to the Fed's disclosed financial statements, Dallas Fed President Robert Kaplan made a fortune in 2020 by trading shares with multiple assets worth more than a million dollars, including Apple, Amazon and Delta Air Lines; Boston Fed President Eric Rosengren held shares in four retorts and shares in Pfizer, Chevron and ATT, and bought and sold them several times. Both announced plans to leave office early last week. Kaplan said she had decided to retire out of concern for its finances or as a distraction from the Fed's work. Rosengren retired nine months early for personal health reasons.

In addition, just as the storm caused by the above two is still fermented by Warren, the 2020 financial disclosure of Federal Reserve Vice Chairman Richard Clarida shows that the day before Chairman Powell issued a statement last year that pointed out that as the epidemic worsened and policy action was possible, Clarida liquidated a bond fund of $1 million to $5 million and switched to equity funds. In response, the Fed said in a statement on Monday that Vice Chairman Clarida's 2020 deal was executed before he participated in discussions on the Fed's emergency action to respond to the COVID-19 pandemic, and the fund was also selected with the prior approval of the Council Ethics Officer.

"The actions of some Fed officials show that building their own personal wealth is more important than promoting the wealth of the American people," Warren said. As for Powell's failure to take steps to prevent these activities, she said, "A quick and positive response is crucial when something goes wrong, but Chairman Powell has failed on both of these tasks, but it's not his own failure." ”

Warren added that last week it had said it did not support the re-nomination of Chairman Powell. "Our nation needs leaders who are willing to enforce strong ethical standards and act quickly when problems arise," she stressed, adding that the United States does not need leaders who are indifferent or shake public confidence in institutions, and she has called on the Fed's key officials to consciously adhere to stricter ethical standards. "My proposal doesn't solve all the problems for any official involved in illegal insider trading, but this proposal would greatly reduce the likelihood of any misconduct by the Federal Reserve, all other federal agencies, Congress, and the White House."

In addition to calling on Fed officials to take the initiative to follow stricter ethical standards, Warren wrote to SEC Chairman Gary Gensler on October 4 local time, asking the SEC to investigate whether the personal financial investments of senior Fed officials, including Vice Chairman Richard Clarida, violated insider trading rules.

Warren wrote in the letter that the SEC should determine the legality of the "morally suspicious transactions" of three Fed officials and open an investigation. "Reports by Fed officials about such financial activities raise serious questions about possible conflicts of interest and a disregard for public trust." Finally, and most importantly, from the SEC's perspective, if these transactions are based on fed officials' knowledge of non-public market movements, they may represent potentially illegal activities. ”

And at a Senate hearing on Sept. 28, Warren called Powell, who has led the Fed since 2018, a "dangerous man, considering the latter's actions on the Fed's financial regulations that don't merit re-election. Powell dismissed this by saying that capital at large banks is at a multi-decade high.

At a press conference at the Previous September Interest Rate Meeting, Powell said he was unaware of the behavior of two Fed officials, Kaplan and Rosengren, about the ethical questions raised by their buying and selling of stocks.

"We are well aware that the trust of the American people is critical to our effective execution of our mission," he added, "which is why I instructed the Fed to begin a comprehensive review of the ethical rules regarding the financial assets and activities it allows officials to hold." I would like to point out three specific restrictions: first, that ownership of certain assets, such as bank securities and other assets, is not allowed to trade or buy or sell financial assets at all before or during FOMC meetings; and third, we need to disclose asset holdings on a regular basis. ”

Powell stressed that the Fed needs to make changes, and it will change as a result. "It's going to be a thorough, comprehensive review. We will gather all the facts and study further tightening our rules and standards. Powell has ordered a comprehensive review of the ethical code for senior officials, holding and buying and selling financial assets, which will be adjusted in due course to further tighten the requirements.

The actions of the three Fed officials may also affect subsequent Fed decisions, with Kaplan and Clarida always seen as hawkish and Rosengren as dovish. Heeled by Warren's "Powell for a failed leader," Biden said he still had confidence in Powell when asked by reporters during a visit to Michigan. "So far, yes."

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