Federal Reserve Chairman Jerome Powell has directed officials at the central bank to take a “comprehensive look” into the ethics rules surrounding permissible financial holdings and activities by senior staff.
A spokesperson confirmed to The Hill on Thursday that Powell issued the directive last week after reports emerged of stock trades made by leaders at the Fed’s banks in Dallas and Boston last year.
“This review will assist in identifying ways to further tighten those rules and standards. The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct,” the spokesperson said in a statement.
“The core rules that guide personal financial practices for Federal Reserve officials are the same as those for other government agencies. We also have a set of supplemental rules that are stricter than those that apply to Congress and other agencies that are specific to the work we do at the Federal Reserve,” the statement continued.
“Because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission, Chair Powell late last week directed Board staff to take a fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials.”
Last week, the heads of two regional Federal Reserve banks — Dallas President Robert Kaplan and Boston President Eric Rosengren — came under scrutiny following a report from The Wall Street Journal detailing some of their 2020 investments.
The newspaper found that Kaplan had traded stocks in companies like Apple Inc., Alibaba Group Holding Ltd. and Amazon.com Inc. Some of his trades reportedly reached well into the seven-figure range. The report also detailed multiple real estate investments made by Rosengren.
While both bank presidents said they complied with ethics rules, they later said they would divest their assets to avoid the appearance of any conflict of interest.
The Fed disclosed news of Powell’s directive shortly after Sen. Elizabeth Warren (D-Mass.) sent letters to the heads of a dozen regional Fed banks on Wednesday, urging them to prohibit ownership and trading of individual stocks by senior officials.
Warren also called on the Fed to implement “strong and enforceable ethics and financial conflicts of interest rules” and requested bank officials send her a “written plan for putting these rules in place.”
In her letters, Warren said “it was the right move” by Kaplan and Rosengren to pledge to sell their stocks.
But she said the American public “should not have to rely on vague and unenforceable promises made amidst an ethics firestorm in order to have confidence that Fed officials are acting solely in the public interest, not based on their own financial interests.”
Warren on Thursday responded to news of the forthcoming ethics review by tweeting: “A review of Fed ethics rules is long overdue but it shouldn’t prevent regional Fed leaders from acting on their own. Today, they can adopt strong ethics rules that bar leaders from trading and owning individual stocks.”
Updated at 1:20 p.m.