A Fed Official’s 2020 Trade Drew Outcry. It Went Further Than First Disclosed.

That’s because Fed officials were actively rescuing a broad swath of markets in 2020: In March and April, they slashed rates to zero, bought mortgage-tied and government bonds in mass quantities, and rolled out rescue programs for corporate and municipal debt. Continuing to trade in affected securities for their own portfolios throughout the year could have given them room to profit from their privileged knowledge. At a minimum, it created an appearance problem, one that Mr. Powell himself has acknowledged.

Mr. Kaplan resigned in September, citing the scandal; Mr. Rosengren resigned simultaneously, citing health issues. Mr. Clarida’s term ends at the close of this month, which it was scheduled to do before news of the scandal broke.

Mr. Clarida’s trades, which Bloomberg reported earlier, also raised eyebrows among lawmakers, including Senator Elizabeth Warren of Massachusetts, who has demanded a Securities and Exchange Commission investigation into Fed officials’ 2020 trading. But many ethics experts had seen the transaction as more benign, if poorly timed, because it happened in a broad-based index and the Fed had said it was part of a planned and longer-term investment strategy.

The new disclosure casts doubt on that explanation, given that Mr. Clarida sold out of stocks just days before moving back into them.

“It’s peculiar,” said Norman Eisen, an ethics official in the Obama White House who said he probably would not have approved such a trade. “It’s fair to ask — in what respect does this constitute a rebalancing?”

Ms. Warren reacted to the news on Twitter, calling the situation “deeply troubling” and saying that stock trading should be banned among federal officials.

Article source: https://www.nytimes.com/2022/01/06/business/economy/richard-clarida-fed-stock-fund.html