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Fed's Powell investments raise questions over central bankers' market activity

AFP
AFP
 2021-10-19
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US Federal Reserve Chair Jerome Powell pulled cash out of an investment fund in October 2020 /POOL/AFP/File

Disclosure forms showing Federal Reserve Chair Jerome Powell took $1 million to $5 million out of an investment fund last year have raised new questions about trading activity by central bank officials.

Unlike a Fed regional bank president who resigned after drawing criticism last month for actively trading individual stocks, Powell's disclosure shows transactions only in funds.

But the revelations come as President Joe Biden considers whether to reappoint Powell for a second four-year term as Fed chief.

Powell's term ends in early February, and Biden has not yet commented on his plans, although Treasury Secretary Janet Yellen, Powell's predecessor at the Fed, reportedly supports keeping him in the post.

The October 1, 2020 sale from the Vanguard Total Stock Market Index was the largest single transaction reported by Powell in the last six years of disclosures dating back to when he was a member of the Fed board, according to documents reviewed by AFP.

"The withdrawals of funds were to meet family expenses," a Fed spokesperson told AFP.

The American Prospect, a liberal news site that has called for Powell to be replaced, first reported the transactions on Monday, linking them to talks at the time over a new pandemic relief package and a single day drop in the stock market.

Such trading activity raises questions given the Fed's active role in the US economy, and a single comment from Powell or other central bankers can send stock prices rising or falling.

Fed officials cannot hold financial stocks since they regulate banks, and they are subject to a trading blackout for 10 days before the meetings of the policy-setting Federal Open Markets Committee (FOMC).

Powell's large transaction occurred a month before a policy meeting.

All the disclosure forms were signed by a government ethics officer certifying they complied with regulations. The forms are available on the website of the Office of Government Ethics.

After reports emerged last month about stock trades by Dallas Fed President Rob Kaplan and the Boston Fed's Eric Rosengren, Powell stressed that the officials had not violated any existing rules, but he nonetheless announced plans to review the ethics rules regarding investing and the internal watchdog is investigating the activity.

Kaplan left his post on October 8, while Rosengren moved his already-scheduled retirement up by several months to September 30.

Fed Vice Chair Richard Clarida moved between $1 million and $5 million into a stock fund from a bond fund in February 2020, a day before Powell announced the central bank could act as the Covid-19 pandemic worsened.

Elizabeth Warren, a Democratic senator known for her criticism of the Fed's banking oversight, has asked the Securities and Exchange Commission regulator to investigate the officials' trading.

Warren's own disclosure statement shows her spouse bought $1 million to $5 million from the same fund that Powell sold.

hs/dw

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