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Two senior federal officials retired following transaction disclosure | AP Communications

Washington (AP) — At a rare moment of federal reserve ethical controversy, two senior officials resigned Monday following exposure to financial transactions that revealed potential shortcomings in federal investment rules. ..

Eric Rosengren, president of the Federal Reserve Bank of Boston, said he would step down this week for health reasons. Meanwhile, Federal President Robert Kaplan of Dallas said he would resign on October 8 to avoid becoming a “distraction” from the broader mission of the federal government.

Financial disclosure of two officials Caused criticism from government observers After they unveiled a major stock transaction in 2020, the federal government was spending trillions of dollars to stabilize the financial market and boost the economy. Due to their deal, two officials could benefit from the Fed’s actions.

Investment by Rosengren and Kaplan was allowed under Fed rules, but at least caused the emergence of conflicts of interest that Fed policy discouraged. Senator Elizabeth Warren, a Democrat in Massachusetts, has sharply criticized the deal and called for a ban on equity ownership by federal authorities.

Federal Chair Jerome Powell I will testify on Tuesday In front of the Senate Banking, Housing and Urban Affairs Commission, including Warren, you may face questions about federal ethical rules. According to observers, the resignation will give Powell a concrete reaction he can point out.

“The resignation of Rosengren and Kaplan should ease pressure on Powell, who failed to express his trust in the two presidents,” said Krishna Guha, an analyst at Investment Bank Evercore ISI, at a press conference last week. “.

The presidents of 12 regional banks participate in the federal private policy-making meeting. It discusses central bank interest rate policies and is familiar with economic data that is not always open to the public. Federal decisions can cause rapid fluctuations in the financial market. So are the president’s speeches and comments to the media.

Federal Chair Jerome Powell Said last week The federal government will change its ethical policy upon disclosure. Nevertheless, the federal government may face pressure to allow external investigations into whether two officials or other officials have traded, based on inside information about federal actions.

“After this terrible breach of public trust, only a full investigation and referral to the (Securities Trading Commission) will be accepted,” said Jeff, director of the Revolving Door Project, a non-profit organization that oversees the appointment of the government. Hauser said.

Last year, Kaplan traded at least $ 1 million in 22 stock and index funds, including Amazon, Chevron, Facebook, Johnson & Johnson.

“The Federal Reserve is approaching a key point of economic recovery as it considers the future path of monetary policy,” Kaplan said in writing. “Unfortunately, my recent attention to financial disclosure poses a distracting risk,” Kaplan said he would resign on October 8.

Rosengren was investing in a fund that owns mortgage-backed bonds of the same type that the federal government bought hundreds of billions of dollars this year.

Rosengren said he was qualified for a kidney transplant last year and that the stress of working in the federal government during the pandemic recession worsened his health.

“It became clear that we should aim to reduce stress so that we can focus on our health problems,” he said.

Rosengren and Kaplan did not vote for members of the federal policy-making committee this year, but contributed to the forecast of federal interest rate policy. Last week, the federal government announced that it was considering raising short-term interest rates., Currently almost zero, by the end of 2022. This was a shift from June, when federal forecasts did not show a rise until 2023.

Both are considered relatively “hawkish” policy makers. That is, they often prefer higher interest rates to combat inflation.

Powell’s own financial disclosure shows that he owned the municipal bond in 2020, even though the federal government began buying such bonds for the first time last year to stabilize its market. Powell, a private equity executive before being appointed to the federal board of directors in 2012, said last week that he had owned Muni for years and cleared continuous ownership with the Department of Government Ethics. He said he did.

At a press conference last week, Powell touched on why these ethical concerns ignited. Previously, municipal bonds were considered a safe asset owned by federal officials because they were not bought or sold by the federal government. Still, that was the case last year, and I started buying corporate bonds for the first time.

Kenneth C. Montgomery, the first vice president of Boston Fed, will become president and CEO. Meredith Black, First Vice President of the Dallas Federation, will be the interim president.

The president of a federal regional bank is elected by six members of the board of directors of each non-banker. Directors affiliated with banks are prohibited by law from participating.

Copyright 2021 AP communication. all rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.



Two senior federal officials retired following transaction disclosure | AP Communications

Source link Two senior federal officials retired following transaction disclosure | AP Communications

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