By Howard Schneider
WASHINGTON (Reuters) – Federal Reserve ethics officials in March 2020 cautioned Fed policymakers about personal securities trading as the central bank geared up for what became a massive and wide-ranging effort to battle the pandemic and keep the economy and asset markets from crashing, the New York Times reported on Wednesday.
The Times said it had confirmed the substance of a March 23 email from the Fed’s main ethics office, ultimately distributed through the system and to the 12 regional bank presidents, advising against what the Times characterized as unnecessary trading given the Fed’s developing crisis response.
Over the weeks to come the Fed would launch programs that touched virtually every asset market and even offered credit to individual businesses.
The Times report suggested that bank officials in charge of enforcing and advising on its internal rules were sensitive to the potential conflicts, or at least the appearance of them, that could arise as policymakers debated and voted on programs that would ultimately pull financial markets from the brink of collapse and set the stage for a record run of appreciation.
The Times said that the Fed has refused to release the email, but that its contents had been verified by someone who read it.
The Fed did not immediately respond to a request for comment and release of the underlying document.
Reports about the 2020 trading activities of Dallas Fed president Robert Kaplan and Boston Fed president Eric Rosengren led to their resignations, and there has been criticism as well of transactions by Fed chair Jerome Powell later in the year, in October, and by Fed vice chair Richard Clarida in February, before the coronavirus crisis took hold.
In all cases the officials said their activity complied with rules around the types of securities officials can own and the timeframes in which they can buy and sell.
The larger issue – of whether those rules put appropriate restrictions on officials with broad power to influence U.S. markets – has become entwined in the Biden adminstration’s consideration of Powell for a second term as chair.
(Reporting by Howard Schneider; Editing by Howard Goller)
