Saturday, October 23, 2021

Dallas Fed chief Robert Kaplan to resign after stock trade dispute

Dallas Federal Reserve Chairman Robert Kaplan announced his resignation on Monday, the move comes in the wake of a recent controversy over stock trades conducted during the pandemic, when the Fed took extraordinary measures to boost the economy and boost markets. .

The announcement, which came in a September 27 press release from the Dallas Fed, acknowledged the controversy surrounding its trading activity, which was permitted by the Fed’s ethics rules, but drew criticism over potential conflicts of interest. Kaplan, who has served as president and CEO of the Dallas Fed since 2015, will retire early, effective October.

“During my tenure, I have complied with all Federal Reserve ethical standards and policies. My securities investment activities and disclosures meet bank compliance rules and standards,” Kaplan said in the announcement.

Kaplan came under fire for trading several individual stocks in 2020, a year the Fed slashed interest rates to near zero and launched a massive asset-buying program, reducing monthly Treasury and mortgage security purchases to nearly zero. Earned 120 billion dollars.

The Dallas Fed’s board of directors said in a statement that Kaplan’s decision to retire early was “to eliminate any distraction of the Federal Reserve System around his personal investment activities,” although the board noted that Kaplan had made acceptable investments. The practices around the Fed followed the rules. its employees.

Fed officials are subject to specific restrictions, such as not doing business during the so-called blackout period around each meeting of the Federal Open Market Committee (FOMC), when policy-sensitive information is distributed. They are also not allowed to hold stock in banks or mutual funds concentrated in the financial sector and are prohibited from reselling securities within 30 days of purchase.

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But the Fed’s code of conduct also has broader language, stipulating that employees should “avoid any situation that could give rise to a genuine conflict of interest or the presence of a conflict of interest.”

Kaplan’s resignation was announced on the same day that Boston Federal Reserve Chairman Eric Rosengren said he was retiring nine months ago, citing deteriorating health from a long-standing kidney condition. His last day will be 30 September.

Like Kaplan, Rosengren also landed in hot water after financial disclosures showed he bought and sold securities in real estate investment trusts in 2020.

Kaplan and Rosengren both said they would abstain from any stock trading while taking leadership roles at their respective institutions, and promised to sell all of their stock holdings and put the proceeds into passive investments by the end of September.

Dennis Kelleher, head of the Better Markets think tank on financial regulation, told Reuters that Kaplan and Rosengren’s resignations were “grossly inadequate”. He called on Federal Reserve Chairman Jerome Powell to “make full disclosure of everyone at the Fed who did business during the pandemic while in possession of non-public information.”

Following the stock trading disclosures, Powell ordered a review of ethics rules surrounding holdings and other financial activities by senior Fed employees.

Powell could face tough questions about the Fed’s ethics standards when he appears before the Senate Banking Committee on September 28.

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Tom Ozimek has an extensive background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s heard from Roy Peter Clark: ‘Hit your goal’ and ‘Leave the best for last.’

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This News Originally From – The Epoch Times

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