Two Fed officials leave amid investment transaction review

WASHINGTON, Sept.27 (Reuters) – Two Federal Reserve officials who have come under scrutiny for their investment trades last year announced their retirement on Monday.

Dallas Fed Chairman Robert Kaplan said Monday afternoon that he would retire on October 8, citing the “distraction” from the controversy that surrounded his investment decisions.

The announcement came after Boston Fed Chairman Eric Rosengren announced earlier today that he would retire on Thursday, September 30, citing a long-term health problem.

The two Fed officials have come under public scrutiny for investment transactions made last year, which has raised questions about the effectiveness of the Fed’s ethics rules.

Both have been called on to resign over actions taken at a time when millions of Americans have lost their jobs and the Fed was taking historic steps to support financial markets and the economy. Read more

Kaplan made multi-million dollar transactions in individual stocks in 2020 and Rosengren invested in real estate investment trusts, according to recent financial reports.

The financial information did not appear to differ significantly from previous years, and the two officials said their investment transactions had been approved by ethics officers. But stocks have been seen as problematic for a year in which the Fed has also taken unprecedented steps to stabilize financial markets and the economy in the wake of the rapidly unfolding pandemic.

Asked if he trusted the two chairmen of the Fed’s regional banks to do their jobs, Fed Chairman Jerome Powell, who launched a broad review of the Fed’s rules, said the week last that “in terms of trust and stuff like that, I think, no one is happy.”

‘DISTRACTION’

While Rosengren should have retired next June anyway because he would have reached the Fed’s mandatory retirement age of 65, Kaplan still had several years before he grew old without a job.

In a statement that did not mention the investment controversy, Rosengren revealed that he had qualified for the kidney transplant list in June 2020 and that he wanted to make “lifestyle changes” to protect his. health.

Kaplan said in a statement that questions about its investments had become a “distraction” for the central bank.

“The Federal Reserve is approaching a critical point in our economic recovery as it deliberates on the future direction of monetary policy,” Kaplan said. “Unfortunately, the recent emphasis on my financial disclosure risks becoming a distraction from the Federal Reserve’s performance of this vital work.”

The Fed’s last such high-profile departure was in 2017, when then-Fed Chairman Jeffrey Lacker resigned despite acknowledging that he had been the source of information five years earlier in a report. Medley Advisors report which at that time included unpublished information. information.

Lacker was explicitly blamed, saying his “conduct was inconsistent with … privacy policies.” Neither Rosengren nor Kaplan have acknowledged any violation of the Fed’s ethical rules that require them to adhere to certain business practices and even avoid the appearance of a conflict of interest.

The back-to-back resignations leave a suddenly wider opening for a potential overhaul of the Fed’s leadership.

US President Joe Biden is weighing whether to re-elect Fed Chairman Jerome Powell and is set to appoint up to three more to the seven-member Washington-based Board of Governors, a group long criticized for be made up mostly of white men.

The departure of the two Fed bank presidents could allow for a more diverse group of regional bank presidents, who are chosen by local boards with the approval of the Fed governors. Currently, seven of the twelve bank presidents are white men, three are white women, and two are non-white men. Read more

Reporting by Howard Schneider, Ann Saphir, Jonnelle Marte and Lindsay Dunsmuir; Editing by Raissa Kasolowsky, Andrea Ricci and Aurora Ellis

Our Standards: Thomson Reuters Trust Principles.


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