As it tries to reduce public distrust and legitimacy crises, several scandals involving insider trading at the Federal Reserve have been exposed over the past week.
Senior staff and policymakers at the Fed are now barredAccording to a press release, the agency will not allow individuals to buy securities and will require shorter reporting guidelines. Senior Fed officials will not be allowed to trade diversified assets such as mutual funds.
The scandal that led to the new rules is still likely to occur. Last week The American Prospect Manifested that Fed Chair Jerome Powell sold between $1 million and $5 million from an index fund — a mutual fund that mirrors the performance of the market — just before a large market crash in October of last year. Top officials can still trade mutual funds under the rules. type of tradeIt would still be legal to do so.
Powell should be praised by economists and progressive lawmakers. rsted from the Fed, saying that he’s weak on climate issues and regulation of the financial sector. Gerald Epstein, an economist, wrote this. Truthout that Powell’s financial regime and de-regulation moves have likely exacerbated financial inequality and weakened economic growth that would support the working class.
Criticizing the Fed’s pandemic policies that gave preference to bailing out markets over small governments and businesses, Epstein wrote: “In the absence of a strong commitment to financial regulation and the will to enforce it, this destructive cycle of speculative excesses, financial crises and bailouts is simply going to continue.”
“These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” Powell said in a statement last week.
The Fed has been involved in many other scandals. Last month, Two regional Fed presidentsIn 2020, significant stock trades were made by those who were affected by the pandemic. Robert S. Kaplan, Dallas Fed President, had made more than two dozen stock trades in the amount of $1 million or more. Eric S. Rosengren, Boston Fed president, purchased and sold real-estate-related securities. These securities are related to Fed policies. Both officials have since resigned.
Also, this month, Reports showed that the Fed’s vice chair, Richard Clarida, had moved between $1 million and $5 million in stocks in February of 2020, the day before Powell announced potential policy overhauls for the pandemic. Clarida is still in the position.
These scandals took place despite a warningThe warning was sent to Fed officials in March last year and warned them that active trading during the financial crises would be a negative reflection on the agency. The Fed actually received the following warnings in March. New York Times has reported that most regional presidents and Fed governors didn’t trade in April.
The Federal Reserve data last week has shown that stock trading is becoming a more accessible financial tool for the wealthy. showedThe record-breaking 89 percent ownership of individual stocks is held by the richest 10 percent of Americans. This has allowed for the accumulation of wealth at top during the pandemic. The top 1 percent gained more that $6.5 trillion in corporate equities or mutual fund assets.
The Fed’s top officials, who have huge sway over financial markets in the country, are representative of some of these top wealthiest individuals in the country. The five appointed members of the FedPowell, Clarida and other millionaires are included in this list. Powell, who is worth between $20 and $55 millions, is the richest Fed Chair in history.
After Clarida’s trade was reported, Sen. Elizabeth Warren (D-Massachusetts) Call for an insider trading probe at the Fed, saying that it shows “atrocious judgment” and erodes confidence in the Fed. She has been extremely critical of Powell as President Joe Biden considers reappointing the Fed president, calling him a “failed” leader and a “dangerous man” to lead the agency.
Warren stated last week that the overhaul was only the minimum. “Of course Fed officials shouldn’t trade individual stocks — it should be illegal,” she wrote. “But Fed officials must avoid actual and perceived financial conflicts, period. We need full transparency on the behavior that’s led us here [and] assurances these new policies will fix what’s broken.”
“There can be no reform without accountability. That means disclosure of all trades to this point by Fed officials,” Warren continued. She urged the Securities and Exchange Commission and Inspector General to investigate the stock trading.
Warren also called on the agency to release the warning handed to Fed officials last year “so that Congress and the public can evaluate the extent to which Fed officials may have known of the risks from their trading, and if they ignored calls by ethics officials to avoid this scandalous behavior,” she said.
Legislators have also been pushing for Congress and other top officials to be barred from trading stocks. In response to the rules barring Fed officials from trading stocks, Rep. Pramila Jayapal (D-Washington) wrote, “Now let’s do members of Congress.”
This year, it was earlier. Warren introducedlegislation to ban top officials trading stocks to combat corruption in the federal government However, Congress has little chance of passing such legislation as members from both sides of the aisleStock trading is a great way to make a lot of money.