The news was surprising, sad, and infuriating all at the same time: After more than three decades of public service, including a distinguished 14-year run as president of the Federal Reserve Bank of Boston, Eric Rosengren is retiring.
The Boston Fed said on Monday that Rosengren, 64, was stepping down because a long-standing kidney ailment had deteriorated over the past year and a half. The abrupt announcement — his resignation is effective Thursday — comes nine months before Fed rules would have required him to call it quits at age 65. It also follows a controversy earlier this month over his investment trading.
“It has become clear that I should aim to reduce my stress so that I can focus on my health issues, and postpone for as long as possible my need for kidney dialysis,” Rosengren said in a letter to Federal Reserve chairman Jerome Powell. As he logged long hours under the pressure of quickly rolling out pandemic relief programs, “regrettably my kidney function declined significantly to the point that I qualified for the kidney transplant list in June of 2020,” he wrote in the letter, which was released by the Boston Fed.
His longstanding kidney problems were not widely known inside the Fed, according to two people with knowledge of the situation. A Federal Reserve spokeswoman in Washington didn’t respond to a question about whether Rosengren previously disclosed his condition to officials at the central bank.
Rosengren’s departure is a loss for Boston and the rest of New England. He has been a calm but persistent advocate for enlightened economic stewardship. He pushed Fed officials to think beyond the complicated mechanics of the financial system to understand the impact of their decisions on people struggling against systemic wealth inequality and racism.
And it’s a damn shame Rosengren has to leave under a cloud.
Earlier this month a watchdog group called Better Markets called on Rosengren and Dallas Fed president Robert Kaplan to resign after they disclosed trades made last year when the Fed was taking extraordinary steps to prop up the economy and financial markets. The trades were included in the financial disclosure forms filed each year by top Fed officials.
“Nobody at the Fed should have been trading” while hundreds of thousands of people were dying and millions of people were being thrown out of work, said Dennis Kelleher, chief executive of Better Markets. “They clearly violated any reasonable reading of the Fed and regional banks codes of conduct.”
Rosengren acted fast to get ahead of the issue. He said he was in compliance with Federal Reserve ethics rules, but opted to unload his investments to avoid “even the appearance of any conflict of interest.”
On Monday, hours after Rosengren said he was retiring, Kaplan, 64, a former Wall Street banker, said he would step down because the scrutiny of his investments “is becoming a distraction.”
Criticism that the Fed’s rules around personal investments are too loose is more than fair. Don’t be shocked if the central bank ends up tightening them following a review ordered last week by Powell.
But now Rosengren is the main character in an ethics controversy, and skeptics will say his health concerns are just an excuse to bow out.
I have no way of knowing for sure, but I would be stunned if Rosengren intentionally broke Fed rules to trade for personal profit. Ask anyone who knows him: There isn’t a more standup guy than Rosengren.
“His integrity is beyond reproach,” said John Fish, chief executive of Suffolk Construction and a former chairman of the Boston Fed. “His reputation means everything to him. He’s not in it for the money.”
“It’s truly unfortunate he has to retire now,” said Cathy Minehan, who was Rosengren’s boss when she was Boston Fed president from 1994 to 2007. “He’s done a fabulous job.”
A Boston Fed spokesman said Rosengren declined to comment beyond his statement.
Powell made a good call when he initiated a ”fresh and comprehensive examination” of the financial ethics rules for Fed officials, including members of the Federal Open Market Committee, or FOMC, which sets interest rates and other monetary policies.
But he should have defended Rosengren’s hard-earned reputation in the process. Instead, he told a news conference last week, “No one on the [FOMC] is happy to be, to be in this situation, to be having these questions raised.”
In a statement Monday released by the Boston Fed, Powell did praise Rosengren, saying he has “distinguished himself time and again during more than three decades of dedicated public service in the Federal Reserve System.”
Too little, too late.
After rising through the ranks, Rosengren took over the Boston Fed in 2007 in the early days of the mortgage market crisis that by the next year threatened to bring down the banking system. He tried to mitigate the impact of the ensuing recession on homeowners, with the Boston Fed holding foreclosure-prevention workshops at Gillette Stadium and elsewhere.
That set the tenor of his leadership, under which the Boston Fed expanded its focus beyond the financial system to the communities in New England. He emerged as a strong advocate within the Fed for paying special attention to the impact of its policies on low- and moderate-income families.
Rosengren was a champion of a Boston Fed program called the Working Cities Challenge, which was designed to foster collaboration among businesses, nonprofits, and municipal leaders to solve problems that impact lower-income residents.
During the pandemic, the Boston Fed took the lead on implementing the Main Street Lending Program, which was intended to help small and midsize businesses but had only limited success. Rosengren also teamed up with other regional Fed presidents to lead “Racism and the Economy” forums, seeking to understand and address important racial challenges in the US economy.
“If you spent any time around Eric . . . you know he cares deeply about the impact the Fed has on ordinary Americans,” said Corey Thomas, CEO of Boston cybersecurity company Rapid7 and deputy chair of the Boston Fed.
Given Rosengren’s focus, it would be fitting if the next Boston Fed leader is a person of color. The Fed is dominated by white men, both in Washington and at the regional banks.
Kenneth C. Montgomery, the Boston Fed’s first vice president and chief operating officer, will serve as interim president until Rosengren’s successor is named, a process that could take around six months, the Boston Fed said. A search committee will consist of the six non-banker directors of the Boston Fed and will be led by the chairman of the bank, Christina Paxson, who is president of Brown University. Their choice must be approved by the Federal Reserve’s Board of Governors in Washington.
“Eric is one of those rare people who combines the highest standards of intellectual rigor with the warmest collegiality, inclusiveness, and humanity,” Paxson said in the statement.
Those qualities should be at the top of the list as she and her board colleagues seek to fill some pretty big shoes.