Members of the U.S. Federal Reserve are getting criticized this week after the central bank published its minutes report from the policy meeting on December 14-15. Following the update, the outgoing vice chair of the Federal Reserve’s trading activities has reignited ethics conversations.
Richard Clarida’s trades under control
The US central bank may shake the markets and this was seen earlier this week when the Federal Reserve released the update from last month’s policy meeting which indicated the Fed’s plans to raise rates and cut the quantitative easing (QE). Shortly after, the New York Times (NYT) published a new disclosure report regarding outgoing Federal Reserve Vice Chairman Richard Clarida.
NYT author Jeanna Smialek wrote that “corrected disclosures show that Vice Chair Richard H. Clarida sold a stock fund, then swiftly repurchased it before a big Fed announcement.” The reporter further added that “Clarida, the departing vice chair of the Federal Reserve, failed to initially disclose the extent of a financial transaction he made in early 2020 as the Fed was preparing to swoop in and rescue markets amid the unfolding pandemic.”
Transactions executed by Kaplan and Powell have been criticized in the past, a former ethics official in the Obama administration calls Clarida’s transactions “special”
This is not the first time that members of the US central bank have been criticized for their trades. Last September, the Wall Street Journal (WSJ) published an article revealing that Dallas Fed Chairman Robert Kaplan “made multiple stock transactions over $ 1 million in 2020, according to a disclosure form. financial support provided by his bank ”. The controversy prompted Federal Reserve Chairman Jerome Powell to order his staff to launch an ethical investigation into the financial activities of Fed members.
Smialek’s report shows that Clarida’s trades are described as “rebalancing” and Clarida called the discrepancies “inadvertent errors.” Peter Conti-Brown, a Fed historian at the University of Pennsylvania told Smialek that the issue with Fed members is “deeply problematic.” Norman Eisen, an ethics official for the Obama administration told the NYT reporter that it was “peculiar.”
“It’s fair to ask – how does this constitute rebalancing? Eisen pointed out again.
Members of the Fed are under close scrutiny for the transactions they made prior to the advancement of monetary easing policies linked to Covid-19. Clarida’s transactions, in particular, were reportedly settled the day before Powell announced the Fed’s emergency measures to help support the economy. The Fed member’s alleged transactions have prompted politicians like Senator Elizabeth Warren (D-Mass.) To ask the Securities and Exchange Commission (SEC) to investigate the ethical issues.
