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Powell asks Fed to examine staff trading rules after disclosures

Eric Rosengren, president and chief executive officer of the Federal Reserve Bank of Boston, along with Dallas’s Robert Kaplan, announced on Sept. 9 that they would both sell their individual stock holdings by Sept. 30.Paul Yeung/Bloomberg

Federal Reserve Chair Jerome Powell has ordered a “fresh and comprehensive” examination of the central bank’s ethics rules around permissible financial holdings and activities by senior Fed officials.

“This review will assist in identifying ways to further tighten those rules and standards,” a Fed spokeswoman said in a statement Thursday. “The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”

Powell gave the order late last week, the Fed said. The move followed revelations about investments and trading earlier in the week by two of the central bank’s senior officials that critics said showed the need to increase Fed accountability and oversight.


Boston Fed President Eric Rosengren and Dallas’s Robert Kaplan announced Sept. 9 that they would both sell their individual stock holdings by Sept. 30, in moves aimed at quelling ethical concerns after their trading activity last year raised questions.

Both said their transactions had complied with the Fed’s ethics rules and they were acting to avoid even the appearance of any conflict of interest. But critics say the situation should never have arisen in the first place.

“This controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” Elizabeth Warren, Democratic senator from Massachusetts, said in a statement Thursday.

“Regional Fed leaders must ban the ownership and trading of individual stocks by senior officials, and impose strong and enforceable ethics and financial conflicts of interest rules for themselves and their staff to restore public trust,” she said.

The Fed noted in its statement that its rules on the personal financial practices of Fed officials are the same as those for other government agencies, and it also has a set of supplemental rules “that are stricter than those that apply to Congress.”


Rosengren and Kaplan’s trading activities — revealed in the annual disclosures filed by all 12 regional Fed presidents — come at a time when the Fed is already under fire from some quarters for aggressive policy actions during the pandemic that have elevated asset prices, disproportionately benefiting wealthier Americans.

The disclosure by Kaplan, a former senior executive of Goldman Sachs, shows that among multiple $1 million-plus transactions in his portfolio, he bought and sold iShares Floating Rate Bond ETF, which tracks the level of bonds under five years of maturity, and would be influenced by Fed rate policies and projections.

Rosengren’s disclosure listed stakes in four separate real estate investment trusts and listed multiple purchases and sales in those and other securities. Those investments raised eyebrows because he has publicly warned about the risks in commercial real estate.