The Massachusetts Democrat asked the SEC to investigate the extent of trading carried out by at least three high-ranking officials at the central bank, including the timing of the trades and whether or not those trades “may have been influenced by non-public information.”
The request comes after reporting last Friday showing that Fed Vice Chairman Richard Clarida moved millions of dollars out of a bond fund and into two stock funds in February 2020. The trades, first reported by Bloomberg, were executed days before the central bank started responding to financial market turmoil at the onset of the pandemic last year.
Details on the Clarida trades follow the abrupt retirement announcements from two regional Fed heads after public backlash on their financial transactions made in 2020.
Boston Fed President Eric Rosengren was revealed to have traded real estate investment trusts while he was publicly warning of the pandemic-associated risks to the industry, while Dallas Fed President Robert Kaplan made a number of multimillion stock trades (including floating bond rate exchange-traded funds).
In her letter, Warren said the trades “reflect atrocious judgment by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”
Asked about trades made by senior Fed officials, the SEC told Yahoo Finance last week that it “does not comment on the existence or nonexistence of a possible investigation.”
Rosengren and Kaplan both insisted their trades were compliant with the Federal Reserve system’s ethics rules, but both announced on Sept. 27 that they would be retiring within two weeks.
A Fed spokesperson said Clarida’s financial disclosures show “transactions that represent a preplanned rebalancing of his accounts,” adding that the transactions were cleared by the Fed Board’s ethics official.
Shortly after reporting on Rosengren and Kaplan’s trades, Fed Chairman Jerome Powell launched a review of the central bank’s ethics rules.
Questions have been raised as to why members of the policy-setting Federal Open Market Committee (FOMC), with immense power to move markets, would ever be allowed to personally profit on trades.
“No one is happy,” Powell told the press on Sept. 22. “No one on the FOMC is happy to be in this situation, to be having these questions raised. It’s something we take very, very seriously.”
Peter Conti-Brown, a professor at the University of Pennsylvania who has written about Fed independence, told Yahoo Finance last week that the entire situation is a “calamity and a scandal” for the Fed.
“I think central bankers should never be under a cloud of suspicion that they’re advocating for policies that will enrich them,” Conti-Brown said.