Dallas Federal Reserve President Robert Kaplan became the second regional central bank leader to resign Monday, saying he was stepping down early following a recent controversy over stock market trades he made.
Kaplan’s early retirement follows an announcement earlier in the day from Boston Fed President Eric Rosengren, who said he will leave. He cited health concerns, and not the issue over his investment portfolio activity.
“The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work,” Kaplan said in a statement.
"The recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of [its] vital work."
His retirement takes effect Oct. 8. The resignations come a day before Fed Chair Jerome Powell is to spend two days on Capitol Hill updating legislators on the Fed’s efforts to combat the economic impact of the Covid-19 pandemic.
Controversy had swirled over the issue following disclosures that Kaplan in particular had been executing large-dollar trades in big-name companies such as Amazon, Apple and Delta Air Lines. The Wall Street Journal first reported the trades.
Subsequent to the disclosures, both Kaplan and Rosengren said they would be selling their stocks to avoid the appearance of conflict. Questions were raised because the Fed has conducted trillions of dollars in asset purchases aimed at helping markets function, and has bought corporate bonds from mega-cap companies including Apple.
Kaplan insisted he had done nothing wrong.
“During my tenure, I have adhered to all Federal Reserve ethical standards and policies,” he said in his monthly statement. “My securities investing activities and disclosures met Bank compliance rules and standards.”
Still, the issue has reverberated through the Fed, with officials pledging to tighten rules so that such potential conflicts don’t happen again.
“We need to make changes, and we’re going to do that as a consequence of this,” Powell said last week. “This will be a thorough going and comprehensive review. We’re going to gather all the facts and look at ways to further tighten our rules and standards.”
Powell vowed that changes would be made.
“I want to be able to look back on this years from now and know that we rose to meet this challenge and handled the situation well and that what we did made a lot of sense and protected the public’s interest and the institution that we’re all a part of,” he said.
Powell on Monday wished Kaplan well and praised his work at the Dallas Fed.
“He has been a passionate and forceful public voice on a wide range of issues, including the critical value of early childhood education and literacy,” the chairman said in a statement.
Meredith Black, the first vice president at the Dallas Fed who herself was planning on retiring, will serve as interim head for the district until a permanent successor is chosen.