Senator Elizabeth Warren on Tuesday assailed what she described as a “culture of corruption” at the Federal Reserve and urged the central bank to tighten its ethics protocols.
“I rise today to express concern about a culture of corruption among top officials [at] the Federal Reserve,” Warren said from the floor of the US Senate. “Officials at the Federal Reserve are entrusted to make decisions that affect the global economy and touch the lives of every person in our country.”
Federal Reserve officials have demonstrated conflicts of interest by making questionable stock trades, Warren said. She noted that recently retired Boston Fed boss Eric Rosengren has faced scrutiny following the release of annual disclosure forms showing he bought and sold shares of real estate investment trusts, or REITs, and other securities last year whose values were likely 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.”
Warren said Tuesday that Fed officials must clean up their act. “The Federal Reserve makes hugely consequential decisions, decisions involving interest rates, trillions of dollars worth of lending and debt, and the regulation and supervision of the banking and financial systems,” Warren said.
Last year was “particularly consequential” as the Fed took steps to shore up markets during the COVID-19 pandemic. Federal Reserve officials relied on “vast quantities” of non-public data to inform their decisions, she said.
“Under these circumstances, for Fed officials to actively trade in the market raises legitimate questions about conflicts of interest and insider trading,” Warren said. “These Fed officials’ actions show, at a minimum, very bad judgment. They also suggest that some Fed officials believe that building up their own personal wealth is more important than strengthening the American people’s confidence in the Fed.”
Warren said she has asked the SEC to look into the stock trades of Federal Reserve officials. She also reiterated her opposition to Fed Chair Jerome Powell’s nomination for another term, saying he had “failed as a leader.”
“In his years as chair of the Fed, it is not clear why Mr. Powell did not take steps to prevent these activities,” Warren said. “Surely, he understands that this kind of behavior by Fed officials corrodes the public trust in the Fed. And that, in turn, such corrosion undermines the effectiveness of the Fed.”
Warren lambasted Powell last week during a contentious Senate Banking Committee hearing, saying his record “gives me grave concern. Over and over, you have acted to make our banking system less safe. And that makes you a dangerous man to head up the Fed, and it’s why I will oppose your re-nomination.”
Powell had no response to Warren’s opposition during the hearing. At an earlier news conference, he said he deferred on regulatory matters to the Federal Reserve’s vice chair for supervision, Randal Quarles.