Elizabeth Warren, the Democratic senator from Massachusetts, called on the Securities and Exchange Commission to investigate a series of “ethically dubious” transactions made by the Federal Reserve last year and whether they “violated the rules of insider trading” ‘ has.
In a letter Monday to SEC Chairman Gary Gensler, Warren called on the agency to trade, which was done last year by Richard Clarida, vice chairman, and then regional presidents Eric Rosengren and Robert Kaplan. From the disclosure of the officials for 2020, it appears that they traded for a year when the Fed aggressively moved to support financial markets at the onset of the coronavirus pandemic.
She also asked the SEC to investigate whether these transactions are led by non-public information and in turn violate the provisions prohibiting such purchases or sales.
“Reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for public confidence,” Warren wrote in the letter. ‘It also reflects a gruesome judgment of these officials and an attitude that personal gains are more important than the confidence of the American people in the Fed.
On February 27, a day earlier, Clarida moved between $ 1m and $ 5m from a mutual fund and into an equity fund Jay Powell, Fed Chairman, issued a rare statement between policy meetings indicating that the central bank is taking steps to support the economy. Days later, the Fed announced an emergency rate cut.
According to the Fed, Clarida’s transactions were part of a ‘pre-planned rebalancing’ and were carried out before its involvement in any relevant deliberations. They also received prior approval from the Fed’s ethics officials, the person said.
Clarida’s trading activities, first announced by Bloomberg, came to light shortly after Kaplan of the Dallas Fed and Rosengren in Boston announced their resignations following reports of their transactions. Rosengren left his post last week, while Kaplan left his post at the end of the week.
Their deals were also in line with the Fed’s ethical rules, which forced Powell to launch a drastic review of the standards in September. During the congressional hearings last week, he promised that the rules would be tightened and that any occurrence of a conflict of interest would be “obviously unacceptable”.
“If these transactions were based on Fed officials’ knowledge of non-public, market-moving information, it could have represented illegal activity,” Warren added in her letter.
Warren’s intervention comes just a week after she said she opposed Powell’s reappointment as chairman of the Fed, and she “Dangerous man” due to his record on bank regulation.
Powell, who was once considered a purchase for a second term, faces a tougher road to renaming due to Warren’s opposition and some progressive, high inflation and the central bank’s trade scandal.
The SEC and the Federal Reserve Bank of Dallas declined to comment.
Additional Reporting by Stefania Palma