Powell vows to tighten Fed ethics rules after market outcry

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Powell, speaking at a press conference after a Fed policy meeting, said he was unaware of the transactions before. But he said it’s clear changes are needed.

The existing ethics framework “has served us well, but it is now clearly seen as inadequate for the task of truly maintaining public trust in us,” Powell said in response to a question. “We need to make changes, and we will do it accordingly. “

“We fully understand that the trust of the American people is essential to enable us to carry out our mission, and that is why I have asked the Fed to begin a full review of the ethics rules regarding assets and activities. financial authorities authorized by Fed officials, ”he added.

The two regional Fed chairmen have said they will sell the assets to avoid any suggestion of impropriety, although their actions have been permitted under the Fed’s ethics rules. The Wall Street Journal previously reported on Kaplan’s financial disclosure which showed he made several stock transactions worth over $ 1 million in 2020, including on Apple, Amazon, Boeing and Alphabet, the parent company of Google.

Some groups have called for further action against the two men; the Revolving Door Project, which reviews executive appointees, said they should be put on administrative leave pending a full investigation, while Better Markets said they should resign or be fired.

The crash raises uncomfortable questions for the Fed as Powell waits for President Joe Biden to appoint him for a second term.

Powell did not specifically respond to calls from some, including Warren, for a ban on stock trading by Fed officials, but he agreed that central bank policymakers generally should not own the same assets as the institution buys.

He acknowledged that he had been invested in municipal bonds for years and that the central bank engaged in an unprecedented bailout of states and cities last year, including loans to the public transport system of Illinois and New York.

“I have personally held municipal securities for many, many years,” said the Fed chief, adding that he simply held them until they expire. “It was considered safe because no one expected the Fed to buy municipal securities.”

Powell noted that he reversed this policy during the pandemic because the market was on the verge of collapse. “We also checked with the Office of Government Ethics, who reviewed it carefully and said I had no conflict,” he said. But he added that generally the Fed should avoid this kind of entanglement.

“I want to be able to look back on those years from now and know that we have risen to this challenge and handled the situation well, and that what we did made a lot of sense and protected the public interest and the institution that we are all part of, ”he said.

Due to the quasi-private structure of the Fed’s regional banks, their chairmen are not required to disclose their financial transactions to the Office of Government Ethics, unlike Powell and other members of the Fed’s board of directors based in Washington. The 12 banks prepare annual declarations which they publish voluntarily.

Each regional president’s disclosure is certified by ethics officials at their own bank, although the disclosure is also shared with the Fed’s board in Washington.


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