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The Fed announces stricter rules on trading for policymakers and senior staff


The Federal Reserve is adopting some strict new rules after an outcry over stock trading by top officials there. This involves active trading by a couple of regional Fed bank presidents in Boston and Dallas. NPR's Scott Horsley is our chief economics correspondent and is covering this story. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: You know, I hadn't even ever thought about this, but I guess you know a bank - bank members have portfolios, but I'm still surprised to hear them doing this trading. What happened?

HORSLEY: Yeah. When reporters studied the financial disclosure forms that many Fed officials are required to file each year, they found that two regional Fed bank presidents had been actively buying and selling stocks and other securities during the pandemic. In particular, as you mentioned, the head of the Dallas Fed, Robert Kaplan, traded millions of dollars in shares of companies like Amazon and Delta Airlines. The head of the Boston Fed, Eric Rosengren, traded smaller amounts of securities that were tied to real estate. And all this was happening at a time the Fed was pumping trillions of dollars into the economy. And while both men argued their trading was not a violation of existing ethics rules at the central bank, the chairman of the Fed, Jerome Powell, acknowledged it was not a good look.


JEROME POWELL: No one is happy to be in this situation, to be having these questions raised. It's something we take very, very seriously.

HORSLEY: Now, since then, the two regional bank presidents have retired, and Powell promised that the Fed would adopt more stringent ethics policies. That's now what's being rolled out.

INSKEEP: It sounds like this is yet another of these areas where there was a norm that people would have observed, but there was not an absolute rule. Now it sounds like more of a rule. What's it going to do?

HORSLEY: Well, there were rules, but they're now stricter. The new rule limits what and when Fed officials are allowed to trade. It applies to both officials here in Washington and the regional Fed banks. They are barred from buying individual stocks. They're also prohibited from holding individual bonds and anything tied to government-backed securities. Officials can still have broad-based investments like mutual funds, but they're required to hold them for at least a year. Any trades have to be approved in advance, disclosed within 30 days, and no trading is allowed at times of heightened stress in financial markets. In a statement yesterday, Powell called these new rules tough and said they're designed to offer reassurance that Fed officials are only looking out for the public's interest, not their personal financial fortunes.

INSKEEP: Are the new rules enough to end this controversy?

HORSLEY: Not necessarily. Some critics say the rules are a good start, but they don't go far enough. Dennis Kelleher, for example, who heads the financial transparency group Better Markets, argues that the rules should cover not just senior staff at the Fed as they're written but anybody who has access to nonpublic information.

DENNIS KELLEHER: There's hundreds of people at the Fed who know all sorts of incredibly confidential information that affects the price of investments, and they should not be trading when in possession of that information.

HORSLEY: Kelleher also thinks the very top officials at the Fed should be barred from trading altogether and required to put their assets into a blind trust. Now, in addition to these new rules going forward, Kelleher is demanding a fuller accounting of the trades that have already happened. The Fed's inspector general is looking into that, but Kelleher wants to see an independent probe by the Justice Department and the SEC.

INSKEEP: Didn't the Fed already have quite a lot to do?

HORSLEY: Yes. You know, the economy's in this sensitive place right now. Inflation's high. Job growth has slowed. The Fed is trying to figure out how to take its foot off the gas without pulling the plug on the still fragile recovery. And, of course, Jerome Powell's term as chair ends in February. President Biden has to decide whether to reappoint him. Progressive Democrats who would prefer to see a different Fed chairman have seized on this trading controversy as another way to make their case.

INSKEEP: I'm still trying to figure out the foot off the gas while not pulling the plug.

HORSLEY: (Laughter).

INSKEEP: It's good stuff. Scott, thanks so much, really appreciate it.

HORSLEY: Good to be with you, Steve.

INSKEEP: NPR's Scott Horsley.


Steve Inskeep
Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.