US Federal Reserve members are under fire this week after the central bank released its December 14-15 policy meeting minutes. Following the update, the Fed’s outgoing vice president of business has reignited conversations about ethics.
Richard Clarida’s trade under scrutiny
The US central bank could rattle the markets and this was seen earlier this week when the Federal Reserve published its policy meeting update last month which indicated the Fed’s plans to raise interest rates and cut quantitative easing (QE). Not long after, The New York Times (New York Times) published a new disclosure report on the outgoing Federal Reserve Vice Chairman Richard Clarida.
Gina Smyalek, author of The New York Times, wrote that “corrected disclosures show Vice President Richard H. Clarida sold a stock fund, then quickly repurchased it before the big Fed announcement.” The reporter added that “Clarida, the departing Fed Vice Chair, failed to initially reveal the extent of the financial deal he did in early 2020 as the Fed was preparing to pounce on the markets and bail them out amid the outbreak of the pandemic.”
Trades carried out by Kaplan and Powell criticized in the past, Obama’s previous managerial ethic officially describes Clarida’s careers as “weird”
This is not the first time that members of the US central bank have been criticized for their actions bargains. Last September, the Wall Street Journal (WSJ) published an article revealing that Dallas Fed President Robert Kaplan “has made several stock trades worth $1 million plus in 2020, according to a financial disclosure form submitted by his bank.” The controversy prompted Federal Reserve Chairman Jerome Powell to instruct his staff to launch an ethical investigation into the financial activities of Federal Reserve members.
Smialek’s report shows Clarida’s deals being described as a “rebalancing” and Clarida describing the discrepancies as “unintentional mistakes”. Peter Conti-Brown, a Federal Reserve Bank historian at the University of Pennsylvania, told Smyalek that the issue with Fed members is “extremely problematic.” Norman Eisen, the Obama administration’s ethics official, told a New York Times reporter that it was “strange.”
“It is fair to ask – in what area does this rebalancing constitute?” Note Aizen as well.
Fed members are largely scrutinized for the trades they made before the monetary easing policies related to Covid-19 progressed. Clarida’s deals, in particular, were reportedly settled the day before Powell announced the Fed’s emergency measures to help boost the economy. The Fed member’s alleged deals have caused politicians such as Senator Elizabeth Warren (D-Mass.) to call on the Securities and Exchange Commission (SEC) to investigate ethical issues.
What do you think of the Fed members who have been scrutinized and criticized this week for their stock trading? Tell us what you think about it in the comments section below.
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