The Federal Reserve has released new rules that bar senior officials from purchasing individual securities, a response to ethics scandals that damaged the central bank’s image.
The Fed’s Board of Governors released a statement Thursday afternoon outlining the changes that will be implemented. It said that the new rules will “prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff.”
Senior central bank officials will now only be allowed to buy diversified investment vehicles, such as mutual funds.
“These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” said Fed Chairman Jerome Powell.
The move comes after an internal review by the central bank.
It was recently revealed that Robert Kaplan, who was the president of the Federal Reserve Bank of Dallas, made multiple stock trades last year that were valued at more than $1 million. Additionally, Eric Rosengren, who was the president of the Federal Reserve Bank of Boston, bought and sold real estate investment trust shares.
Both men have since stepped down . Kaplan attributed his retirement to the trading controversy, while Rosengren said that he decided to retire in light of long-running kidney issues. Both men denied any wrongdoing.
Powell was asked about the former presidents’ trading activities during a news conference in September. The chairman told reporters that he was unaware of the transactions until they were reported in the media.
“In terms of having confidence and that sort of thing, I think no one is happy. No one on the [Federal Open Market Committee] is happy to have these questions raised,” Powell said.
Following the controversy, Sen. Elizabeth Warren requested that the Securities and Exchange Commission investigate the trades in question. In a letter, the Massachusetts Democrat asked SEC Chairman Gary Gensler to look into the trades and suggested that they may have been conflicts of interest at best and criminal at worst.
Powell is under particular scrutiny as President Joe Biden weighs whether to nominate him for a second term as chairman. Warren has announced that she would oppose his confirmation, but he enjoys support from many Democrats and Republicans.
Source: Washington Examiner : Fed bans officials from buying stocks in response to trading controversy
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