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Financial Trades By 2 Regional Fed Bank Presidents Draw Ethics Complaints


The trading activity of two regional Fed bank presidents has the Federal Reserve reviewing its ethics policies. The two Fed leaders have been actively buying and selling securities during the pandemic while also serving on the committee that directs the central bank's interventions in U.S. financial markets. It's one more challenge for Fed Chair Jerome Powell.

Here's NPR's Scott Horsley.

SCOTT HORSLEY, BYLINE: Dallas Federal Reserve Bank president Robert Kaplan bought or sold stock last year worth more than a million dollars each in nearly two dozen companies, including Amazon, Kraft Heinz and Delta Airlines. Eric Rosengren, who runs the Boston Federal Reserve Bank, bought or sold securities tied to real estate. That trading, which was first reported by The Wall Street Journal and Bloomberg, is drawing scrutiny because the Fed itself has poured trillions of dollars into financial markets during the pandemic, moves that Kaplan and Rosengren had front-row seats for.

DENNIS KELLEHER: That may or may not be illegal, but it sure as heck is horrible judgment and totally inappropriate behavior.

HORSLEY: Dennis Kelleher, who runs the advocacy group Better Markets, is demanding an independent investigation. He also says both Kaplan and Rosengren should resign. Fed chairman Jerome Powell has called for an overhaul of the central bank's ethics rules. But Powell declined to say this week whether he still has confidence in the two regional bank presidents.


JEROME POWELL: No one is happy to be in this situation, to be having these questions raised. It's something we take very, very seriously.

HORSLEY: Kaplan and Rosengren have promised to stop trading individual securities, but they insist their past trades were in line with existing rules, which only prohibit trading in bank stocks and just before and after a Fed meeting. The timing of the men's trades is not clear, but officials say it wasn't during the peak period of the Fed's interventions last year. Powell says the Fed's ethics rules have served the central bank well in the past. But he admits they're inadequate now, given the Fed's expanded activity in financial markets.


POWELL: We understand very well that the trust of the American people is essential for us to effectively carry out our mission.

HORSLEY: Kelleher was not impressed, calling Powell's comments Wednesday grossly inadequate.

KELLEHER: This is an acid test for the leadership of Jay Powell. Does he or does he not stand up and condemn other Fed leaders for really profiting off the pandemic?

HORSLEY: The controversy puts another spotlight on the Fed chairman just as President Biden has to decide whether to reappoint Powell to a second term. Some progressive Democrats are lobbying for a different chair, someone like Fed governor Lael Brainard, who might pursue more aggressive bank regulation. Powell declined to comment on the appointment process this week but said he hopes look back on the stock trading dispute years from now and know that he and his colleagues handled it in a way that protects the public and the Fed itself.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
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