After publishing its minutes from December 14-15’s policy meeting, the U.S. Federal Reserve has been criticized by members. Following the update, the outgoing vice chair of the Federal Reserve’s trading activities has reignited ethics conversations.
Richard Clarida’s Trades Under Scrutiny
The U.S. central bank can shake up markets and this was seen earlier this week when the Federal Reserve published last month’s policy meeting update which indicated the Fed’s plans to raise rates and cut back quantitive easing (QE). The New York Times published an updated disclosure report about Richard Clarida, outgoing vice-chair of the Federal Reserve.
NYT author Jeanna Smialek wrote that “corrected disclosures show that Vice Chair Richard H. Clarida sold a stock fund, then swiftly repurchased it before a big Fed announcement.” The reporter further added that “Clarida, the departing vice chair of the Federal Reserve, failed to initially disclose the extent of a financial transaction he made in early 2020 as the Fed was preparing to swoop in and rescue markets amid the unfolding pandemic.”
Trades Executed by Kaplan and Powell Criticized in the Past, Former Obama Administration Ethics Official Calls Clarida’s Trades ‘Peculiar’
It’s not the first time members of the U.S. central bank have been criticized for their trades. Last September, the Wall Street Journal (WSJ) published an article that revealed Dallas Fed president Robert Kaplan “made multiple million-dollar-plus stock trades in 2020, according to a financial disclosure form provided by his bank.” The controversy pushed Federal Reserve chairman Jerome Powell to direct his staff to start an ethics inquiry into the financial activities of Fed members.
Smialek’s report shows that Clarida’s trades are described as “rebalancing” and Clarida called the discrepancies “inadvertent errors.” Peter Conti-Brown, a Fed historian at the University of Pennsylvania told Smialek that the issue with Fed members is “deeply problematic.” Norman Eisen, an ethics official for the Obama administration told the NYT reporter that it was “peculiar.”
“It’s fair to ask — in what respect does this constitute a rebalancing?” Eisen further remarked.
Fed members face intense scrutiny for trades that they made before the introduction of Covid-19-related policies to monetary easing. Clarida’s trades, in particular, were reportedly settled the day before Powell announced the Fed’s emergency measures to help bolster the economy. The Fed member’s alleged trades have caused politicians like Senator Elizabeth Warren (D-Mass.) The Securities and Exchange Commission (SEC), was contacted to inquire into the ethics.
How do you feel about Federal Reserve members being criticized for stock trading this week? Comment below to let us know your thoughts on this topic.
Images CreditsShutterstock. Pixabay. Wiki Commons
DisclaimerThis information is provided for educational purposes only. It does not constitute an offer, solicitation, or recommendation of any company, products or services. Bitcoin.com is not a provider of investment, tax, legal or accounting advice. The author and the company are not responsible for any loss or damage caused by the content or use of any goods, services, or information mentioned in the article.