By Michael S. Derby
NEW YORK (Reuters) – Federal Reserve Chair Jerome Powell two years ago asked the U.S. central bank’s internal watchdog to investigate the trading activities of some of its senior officials, including Powell. The probe has yet to conclude. Here’s a rundown of key events in the controversy.
Sept. 7, 2021: The Wall Street Journal reports that the presidents of the Dallas and Boston Fed banks actively traded in financial markets while helping set monetary policy. Fed ethics officials signed off on the trading, which was done most actively by Dallas Fed President Robert Kaplan, based on an ethics code then in place which called on policymakers to avoid investments that would suggest conflicts of interest.
Sept. 9, 2021: Kaplan and Boston Fed President Eric Rosengren pledge to divest their stock holdings.
Sept. 16, 2021: The Fed says it will review its existing ethics code. Democratic U.S. Senator Elizabeth Warren calls on the Fed to ban stock ownership by its leaders.
Sept. 22, 2021: Powell declines to offer support to Kaplan and Rosengren during a press conference following the end of a policy meeting. “I think no one is happy, no one on the FOMC (Federal Open Market Committee) is happy to be in this situation, to be having these questions raised,” he says.
Sept. 27, 2021: Kaplan and Rosengren announce their departures from the Fed within hours of one another.
Oct. 4, 2021: Powell refers the matter to Fed Inspector General Mark Bialek for a fuller investigation.
Oct. 8, 2021: The Dallas and Boston Fed banks pledge full cooperation with the IG probe, although a full accounting of Kaplan’s trading has never been made public.
Oct. 21, 2021: The Fed announces a new ethics code for central bank officials and senior staff that sharply restricts what they can invest in and when they can trade.
Jan. 6, 2022: The New York Times reports then-Fed Vice Chair Richard Clarida failed to report the extent of a trade in 2020 that was done as the Fed was preparing to offer emergency support during the onset of the coronavirus pandemic.
Jan. 10, 2022: Clarida says he will leave the Fed several weeks before the end of his term.
Feb. 18, 2022: The Fed formalizes a new ethics policy, broadens the scope of what officials can’t do and extends the rules to family members.
July 14, 2022: The IG clears Powell and Clarida of wrongdoing over trades that violated the Fed’s investment policy.
Oct. 14, 2022: Atlanta Fed President Raphael Bostic announces what he said were inadvertent violations of policies restricting when Fed officials could trade and invest. Powell asks the IG to investigate the matter.
March 22, 2023: A bipartisan Senate bill is announced that would make the Fed IG a presidential appointment requiring confirmation by the Senate to increase the watchdog’s independence. The IG is currently selected by the Fed chair.
April 27, 2023: Bialek objects to the Senate bill. The IG defends his independence and says the change would cut the pay for his position, making it difficult in the future to attract high-quality candidates.
May 17, 2023: Senators question Bialek’s independence during a public hearing, and he responds that the Fed has never interfered in one of his investigations
June 15, 2023: Bostic acknowledges more inadvertent trades that ran afoul of the ethics code in place.
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