October 7, 2021

USA: President And CEO Of The Federal Reserve Bank of Dallas Resigned After Being Caught Out For Insider Trading. Announcement Came Hours After Boston Fed President Eric Rosen Did The Same.

written by Steve Liesman
Friday September 17, 2021

(Editor’s note: This story has been updated to reflect new information. Fed Chair Powell owned the municipal bonds in question in a joint account over which he had control. Due to incorrect information provided by the Federal Reserve, CNBC reported initially that Powell owned the munis in a family trust over which he had no control.)

Amid an outcry about Federal Reserve officials owning and trading individual securities, an in-depth look by CNBC at officials’ financial disclosures found three who last year held assets of the same type the Fed itself was buying, including Chairman Jerome Powell.

None of these holdings or transactions appeared to violate the Fed’s code of conduct. But they raise further questions about the Fed’s conflict of interest policies and the oversight of central bank officials.
  • Powell held between $1.25 million and $2.5 million of municipal bonds. They were just a small portion of his total reported assets. While the bonds were purchased before 2019, they were held while the Fed last year bought more than $5 billion in munis, including one from the state of Illinois purchased by his family trust in 2016.
  • Boston Fed President Eric Rosengren held between $151,000 and $800,000 worth of real estate investment trusts that owned mortgage-backed securities. He made as many as 37 separate trades in the four REITS while the Fed purchased almost $700 billion in MBS.
  • Richmond Fed President Thomas Barkin held $1.35 million to $3 million in individual corporate bonds purchased before 2020. They include bonds of Pepsi, Home Depot and Eli Lilly. The Fed last year opened a corporate bond-buying facility and purchased $46.5 billion of corporate bonds.
Among those questions: Should the Fed have banned officials from holding, buying and selling the same assets the Fed itself was buying last year when it dramatically widened the types of assets it would purchase in response to the pandemic?

The Fed’s own code of conduct says officials “should be careful to avoid any dealings or other conduct that might convey even an appearance of conflict between their personal interests, the interests of the system, and the public interest.”

In response to CNBC questions asked in the process of our research, a Fed spokesperson released a statement Thursday saying Powell ordered a review last week of the Fed’s ethics rules surrounding “permissible financial holdings and activities by senior Fed officials.”

A Fed spokesperson told CNBC that Powell had no say over the central bank’s individual municipal bond purchases but that the bonds were held in a joint account over which he did have control. He decided not to trade muni bonds in 2019.

Barkin declined to comment but he did not appear to have any say over the individual corporate bonds purchased by the Fed.

Rosengren has announced he would sell his individual positions and stop trading while he is president. Dallas Fed President Robert Kaplan, who actively traded millions of dollars of individual stocks, also said he would no longer trade and would sell his individual positions. But he said his trade did not violate Fed ethics rules.

A spokesman for Rosengren told CNBC that he “made sure his personal saving and investment transactions complied with what was permissible under Fed ethics rules.”

But Dennis Kelleher, CEO of the nonprofit Better Markets, said if some of these Fed actions are not against the rules, the rules need to change.

“To think that such trading is acceptable because it is supposedly allowed by Fed’s current policies only highlights that the Fed’s policies are woefully deficient,” Kelleher told CNBC.

While trading by Rosengren and Kaplan was not conducted during the so-called blackout period, when Fed officials are not allowed to talk publicly about monetary policy or trade, Kelleher said during a crisis like last year, “the whole year should be considered a blackout period” because Fed officials are constantly talking and crafting policy in response to fast-moving events.

Correction: The Fed itself bought $5 billion to $6 billion in municipal securities last year. The previous figure used in the story incorrectly included money that came from the Treasury used to buffer against losses.
The Wall Street Journal (WSJ)
written by Michael S. Derby
Tuesday September 7, 2021

Federal Reserve Bank of Dallas President Robert Kaplan made multiple million-dollar-plus stock trades in 2020, according to a financial disclosure form provided by his bank, in contrast with other regional Fed leaders who reported more modest financial holdings and smaller transactions.

Eleven of the 12 regional Fed banks have provided disclosures of their leaders’ 2020 financial profiles since Friday, sharing information that gives insight into the holdings of officials who help set the central bank’s monetary policy. The Chicago Fed didn’t make immediately available information for their leader.

Mr. Kaplan has been one of the Fed’s strongest voices warning that high levels of monetary stimulus are boosting risk levels in the financial sector.

According to the disclosure form provided by the Dallas Fed, Mr. Kaplan had a total of 27 individual stock, fund or alternative asset holdings each valued at over $1 million. Mr. Kaplan’s stockholdings included Apple Inc., Amazon.com Inc., Boeing Co., Alphabet Inc., Facebook Inc. and Marathon Petroleum Corp.

The form also shows Mr. Kaplan made some combination of sales or purchases of over $1 million in 22 individual company shares or investment funds. These transactions included Apple, Alibaba Group Holding Ltd. , Amazon, General Electric Co. and Chevron Corp.

Mr. Kaplan, the Dallas Fed leader since 2015, has deep roots in the financial sector. He worked for investment bank Goldman Sachs Group Inc. for more than two decades and rose to become its vice chairman with responsibility for the firm’s investment-banking activities, leaving that job in 2006. Before coming to the Dallas Fed, Mr. Kaplan was a professor at Harvard Business School.

Mr. Kaplan’s wealth and active presence in the financial markets mirrors that of his predecessor at the Dallas Fed, Richard Fisher, who also reported substantial assets and trading in his own disclosures.

A spokesman for the Dallas Fed said Mr. Kaplan’s trading was reviewed and approved by the bank’s general counsel.

The Fed’s 12 regional banks are quasi-private institutions that are technically owned by member banks, and overseen by boards of directors drawn from the private sector. The regional Fed presidents occupy rotating slots on the policy-setting Federal Open Market Committee, and their banks collect local economic intelligence and house banking regulators. The regional presidents are also paid more than the Fed’s Washington-based governors, who are explicitly part of the government.

In the forms provided for the other bank presidents, most reported modest holdings of investment funds and little in the way of large stock trading. Boston Fed chief Eric Rosengren listed a number of stock trades under “joint” status in transactions that were each $50,000 or less, for example. Richmond Fed leader Thomas Barkin, who was a senior executive at management consulting firm McKinsey & Co. before becoming bank president, listed a number of financial holdings each in excess of $1 million.

Atlanta Fed leader Raphael Bostic flagged on his form a number of property holdings that were associated with mortgages, while the Boston Fed leader also had a rental property. Kansas City Fed leader Esther George reported a stake in a farm.
The Wall Street Journal (WSJ)
written by Michael S. Derby
Monday September 27, 2021

The Federal Reserve banks of Boston and Dallas said their presidents were resigning, following reports of the two leaders’ investment trading that prompted calls for their departures and a central-bank review of its ethics rules.

The two banks gave different reasons for the exits. Dallas Fed President Robert Kaplan, a 64-year-old who is resigning effective Oct. 8., acknowledged in a statement released by the bank that his stock trading distracted from the Federal Reserve’s work.

The two officials’ trading activities were made public via annual disclosure forms released by each of the 12 regional Fed banks at the start of the month, and earlier reported by The Wall Street Journal. The forms detail the financial holdings and any trading done by the policy makers over the prior calendar year.

Mr. Powell said last week after the reports: “I was not aware of the specifics of what they were doing.”

The 12 regional Fed banks are quasi-private institutions that are overseen by the Federal Reserve Board of Governors in Washington. The regional banks have private boards of directors. They collect economic information, engage in community development work and, in the case of the New York Fed, they are responsible for the implementation of monetary policy.

The regional Fed bank presidents are selected by their boards with the oversight of the Fed in Washington.

All 12 regional Fed banks leaders were reappointed to new terms at the start of this year in a process that was overseen by Fed governor Lael Brainard.

Before Monday, Messrs. Rosengren and Kaplan had said that while their trading was consistent with internal central-bank rules, to avoid any conflicts of interest they would sell their stockholdings and move the money into cash or diversified mutual funds.

The central bank nevertheless faced calls for the two men to step down. Critics said the trading raised questions as to whether the men were setting monetary policy with the nation’s well-being in mind, or whether they were acting for personal profit. While the regional Fed bank ethics rules prohibited ownership of bank stocks and limited senior leaders’ trading around Federal Open Market Committee dates, they also called on central bankers to avoid even the appearance of impropriety with their investing activity. The FOMC is the Fed’s rate-setting committee.

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UPDATE 10/7/21 at 4:09pm: Added info below.
Trey's Trades published October 6, 2021: Rep. David Scott is a HYPOCRITE. Today we look into Representative David Scott, his stance on retail traders and social media, and his conversation with Gary Gensler.

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