Government’s “Trades” Reportedly Found To Not Violate Federal Law

( Recent financial trades by Federal Reserve Chair Jerome Powell and former Vice Chair Richard Clarida were determined by the central bank’s independent watchdog to have not violated any laws or ethics rules.

The Office of the Inspector General said it is closing its investigation into the pair’s investment activities from 2019 to 2021.

Inspector General Mark Bialek said in a July 11 letter to Powell that they did not find evidence to substantiate the allegations that former Vice Chair Clarida or (Powell) violated laws, rules, regulations, or policies related to trading activities as investigated by their office.  The letter was released on the OIG website on July 14.

Bialek said in his letter that the investigations continue into the presidents of two regional Federal Reserve banks—Robert Kaplan of the Dallas Fed and Eric Rosengren of the Boston Fed—both of whom retired from their posts after financial disclosure forms in September 2021 showed they had been extensively engaged in the financial markets in 2020. Both had said they complied with then-current ethics rules.

Dennis Kelleher, the president and CEO of Better Markets, a nonprofit watchdog group that advocates for stronger financial regulation, criticized the OIG report. The report “was very narrow, omits key information, and is not credible.”

After financial disclosures, the OIG opened separate investigations into several Fed officials in late 2021. Public reporting showed they had bought and sold stocks, real estate investment funds, and other securities amid turbulence in the market in the spring of 2020 after the COVID-19 pandemic emerged.

The trades occurred when the senior officials were privy to discussions about Fed decisions that would likely affect those markets.

The central bank 2020 launched rescue programs and bond purchases to stave off the economic fallout from the pandemic, sparking questions from critics about potential conflicts of interest because the officials could have profited from the Fed’s actions.

In response to the revelations of the questionable trades, the Federal Reserve, in October 2021, adopted sweeping rules on the investing and trading activities of Fed officials, stipulating that they would be blocked from investing in individual stocks and bonds, have to give 45 days advance notice of any trade and obtain prior approval from ethics officials, and have to hold the investments for at least a year.

Richard Clarida stepped down from his post on Jan. 14, just two weeks before his term expired. The Office of the Inspector General (OIG) has concluded that Fed chair Jerome Powell and deputy chair Clarida did not violate the Federal Reserve’s trading blackout rule. The OIG found that a financial adviser made the trades during a period when Fed officials aren’t supposed to trade.

The Better Markets president, John Kelleher, says the Office of Inspector General’s (OIG) investigation into Jerome Powell is “simply not credible” because the Fed chair has stated publicly that no laws or rules were broken. He also disputed the OIG’s conclusions regarding Clarida’s February 2020 transactions concerning claims that it was a pre-planned rebalancing effort.