Eric Rosengren, president and chief executive of the Federal Reserve Bank of Boston, said on Monday that he will step down earlier than planned after 14 years in the job, citing a deteriorating kidney condition.
Rosengren, who faced mandatory retirement when he turned 65 next June, said he qualified for a kidney transplant last year. His retirement is effective on Sept. 30.
“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, who has been at the Boston Fed for 35 years, said in a letter to Federal Reserve chairman Jerome Powell.
Rosengren’s decision comes less than three weeks after he and Dallas Fed president Robert Kaplan were criticized following the annual release of their financial disclosure forms. Hours after Rosengren’s announcement, Kaplan said will retire on Oct. 8, saying, “Unfortunately, the recent focus on my financial disclosure risks becoming a distraction.”
Rosengren’s filing showed that he bought and sold shares of real estate investment trusts, or REITs, and other securities last year whose values likely were affected by the central bank’s efforts to prop up financial markets as the economy plunged into recession. His REIT holdings drew particular attention because he has warned more than once that the coronavirus pandemic could hurt real estate values and cause loan losses at banks.
While Rosengren said he was in compliance with Federal Reserve ethics rules, he opted to sell his stock to avoid “even the appearance of any conflict of interest.”
Powell subsequently ordered a “fresh and comprehensive” examination of the central bank’s financial ethics rules for Fed officials, including members of the Federal Open Market Committee, or FOMC, which sets interest rates and other monetary policies.
“No one on the [FOMC] is happy to be — to be in this situation, to be having these questions raised,” Powell said at a news conference last week. “It’s something we take very, very seriously.”
The 12 regional Fed presidents take turns serving as voting members of the committee. Rosengren was set to be a voting member in 2022.
In a statement Monday released by the Boston Fed, Powell praised Rosengren.
“Eric has distinguished himself time and again during more than three decades of dedicated public service in the Federal Reserve System,” he said. “In addition to his monetary policy insights, Eric brought a relentless focus on how best to ensure the stability of the financial system. My colleagues and I will miss him.”
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.
Rosengren’s longstanding kidney problems were not widely known inside the Boston Fed, according to a person with knowledge of the situation. His doctors urged him to slow down as his condition worsened over the past 18 months.
The Boston Fed said Rosengren hopes to improve his health condition and eventually be able to explore areas of professional interest and contribution, in the future.
After rising through the ranks, Rosengren took over the Boston Fed in 2007 in the early days of 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 its region. 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.
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 president to lead “Racism and the Economy” forums, seeking to understand and address important racial challenges in the US economy.
“Eric is one of those rare people who combines the highest standards of intellectual rigor with the warmest collegiality, inclusiveness, and humanity,” said Christina Paxson, chairman of the Boston Fed board and president of Brown University.
Rosengren and Kaplan of the Dallas Fed, had faced calls to resign because of their trading activities last year.
Kaplan made multiple million-dollar-plus stock trades in 2020, according to his disclosure form. He also reported owning a stake in the Kansas City Royals baseball team worth more than $1 million.
None of the investments listed by Rosengren were valued at $1 million or more. Seven of his 11 holdings were valued at $1,001 to $50,000, and four were valued at $50,001 to $250,000. They included shares of Chevron, AT&T, Pfizer, and Verizon.
He also held REITs that included Annaly Capital Management. Annaly and similar real estate trusts buy and sell mortgage-backed securities, a type of debt that the Fed is buying at a monthly clip of $40 billion as part of its easy-money policies.
Kaplan’s and Rosengren’s trading “seriously called into question not just the adequacy of the Fed’s code of ethics, but the judgment, priorities, and leadership ability of those individuals,” Dennis Kelleher, chief executive of Better Markets, a financial watchdog group, wrote in a letter to the Fed last week.
John Fish, the CEO of Suffolk construction and a former chairman of the Boston Fed, said Rosengren is considered one of the top leaders within the Federal Reserve system.
“His integrity is beyond reproach,” Fish said. “His reputation means everything to him. He’s not in it for the money.”