President Biden has to decide whether to reappoint him. And, of course, Jerome Powell's term as chair ends in February.
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The Fed is trying to figure out how to take its foot off the gas without pulling the plug on the still fragile recovery. You know, the economy's in this sensitive place right now. INSKEEP: Didn't the Fed already have quite a lot to do? The Fed's inspector general is looking into that, but Kelleher wants to see an independent probe by the Justice Department and the SEC. Now, in addition to these new rules going forward, Kelleher is demanding a fuller accounting of the trades that have already happened. HORSLEY: Kelleher also thinks the very top officials at the Fed should be barred from trading altogether and required to put their assets into a blind trust. Dennis Kelleher, for example, who heads the financial transparency group Better Markets, argues that the rules should cover not just senior staff at the Fed as they're written but anybody who has access to nonpublic information.ĭENNIS KELLEHER: There's hundreds of people at the Fed who know all sorts of incredibly confidential information that affects the price of investments, and they should not be trading when in possession of that information. Some critics say the rules are a good start, but they don't go far enough. INSKEEP: Are the new rules enough to end this controversy?
In a statement yesterday, Powell called these new rules tough and said they're designed to offer reassurance that Fed officials are only looking out for the public's interest, not their personal financial fortunes. Any trades have to be approved in advance, disclosed within 30 days, and no trading is allowed at times of heightened stress in financial markets. Officials can still have broad-based investments like mutual funds, but they're required to hold them for at least a year. They're also prohibited from holding individual bonds and anything tied to government-backed securities.
They are barred from buying individual stocks. It applies to both officials here in Washington and the regional Fed banks. The new rule limits what and when Fed officials are allowed to trade. HORSLEY: Well, there were rules, but they're now stricter. INSKEEP: It sounds like this is yet another of these areas where there was a norm that people would have observed, but there was not an absolute rule. HORSLEY: Now, since then, the two regional bank presidents have retired, and Powell promised that the Fed would adopt more stringent ethics policies. It's something we take very, very seriously. JEROME POWELL: No one is happy to be in this situation, to be having these questions raised. And while both men argued their trading was not a violation of existing ethics rules at the central bank, the chairman of the Fed, Jerome Powell, acknowledged it was not a good look. And all this was happening at a time the Fed was pumping trillions of dollars into the economy. The head of the Boston Fed, Eric Rosengren, traded smaller amounts of securities that were tied to real estate. In particular, as you mentioned, the head of the Dallas Fed, Robert Kaplan, traded millions of dollars in shares of companies like Amazon and Delta Airlines. When reporters studied the financial disclosure forms that many Fed officials are required to file each year, they found that two regional Fed bank presidents had been actively buying and selling stocks and other securities during the pandemic. INSKEEP: You know, I hadn't even ever thought about this, but I guess you know a bank - bank members have portfolios, but I'm still surprised to hear them doing this trading. SCOTT HORSLEY, BYLINE: Good morning, Steve. NPR's Scott Horsley is our chief economics correspondent and is covering this story.
This involves active trading by a couple of regional Fed bank presidents in Boston and Dallas. The Federal Reserve is adopting some strict new rules after an outcry over stock trading by top officials there.
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