US Senator Warren blasts Fed for withholding trading records | Financial Markets News

U.S. Senator Elizabeth Warren has rebuked Federal Reserve Chair Jerome Powell for hiding information about transactions by central bank officials during the pandemic and said an investigation into the matter was underway. This statement of the Fed’s inspector general is “troublesome”.

The IG report “raises new concerns about why you continue to withhold important information about the financial dealings of Fed officials from Congress and the public,” said Democrat. Massachusetts owner said in a letter to Powell published Thursday.

Warren – a member of the Senate Banking Committee with oversight authority of the Fed – also sent a letter to all 12 reserve banks requesting that securities trading records be made available to all senior officials. as of January 1, 2020, giving a deadline of August 25 for banks.

Warren’s request to the Board and the reserve banks marks growing dissatisfaction with the central bank’s responses to its main watchdog in Congress. This week, Republican members of the Senate Banking Committee, in response to a separate issue in which the Fed refused to share documents with lawmakers, vowed to create legislation that would force the Fed to save money. disclose certain information to Congress.

Although Republicans and Democrats have sought different information from the Fed, both sides have expressed frustration at being rejected after repeated requests.

2020 Trading

Warren’s criticism revolves around financial disclosures for 2020 that reveal trading by some officials during a time when the Fed is intervening in nearly every key credit market to try to defuse the downturn. economy caused by the pandemic. Reserve banking officials include Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, who resigned.

“My ongoing concerns about the culture of corruption at the Fed have deepened with each new disclosure, and with each failure of the Fed to provide the necessary information to Congress and to Congress,” Warren wrote. general public”.

While the 12 reserve banks are exempt from Freedom of Information Act requirements, including from lawmakers, the Board of Directors is not. Warren and Republican Senator Pat Toomey both said they have directly requested information from the Council multiple times and have not yet received a response they deem appropriate. Senate Banking Committee members have expressed interest in making reserve banks subject to FOIA.

“Unfortunately, obstructionism has become an all-too-common response from the Fed and regional Fed banks – after all, creatures of Congress – to Congressional oversight requests from members of both parties,” 11 Republican members of the committee wrote in an August. 9 letters to Powell.

New rule

The 2020 transactions by several Fed officials have highlighted the central bank’s weak internal oversight and old rules. Powell ordered a review of the rules, and the Fed has since imposed strict limits on how senior officials can invest.

The Fed Board asked IG to investigate the transactions of Kaplan, Rosengren, as well as former Vice President Richard Clarida. The Fed IG also reviewed transactions independently by a trust of the Powell family.

IG removed Clarida and Powell, saying there was no evidence that they “violated laws, rules, regulations, or policies related to trading activities.”

Warren raised some concerns about the inspector general’s report on Powell and Clarida, released as a July 11 “memorandum.”

The senator noted that the IG report, for example, did not address “the fact that the Board of Governors ethics unit issued a warning against unnecessary transactions to Fed officials on March 23, 2020” even as some officials made the transaction.

“These gaps in IG’s creditworthiness and acceptance of explanations for apparent misconduct make the findings in IG’s report simply unreliable,” Warren said. in her letter to Powell.

Kaplan, a former senior executive at Goldman Sachs Group Inc., listed trades in several stocks with trades of $1 million or more on “multiple days” in 2020.

Bloomberg News requested specific dates of transactions through the FOIA and was denied.

Rosengren’s disclosure lists shares in four separate real estate investment trusts and discloses multiple purchases in them and other securities. Those investments raise concerns because he has publicly warned about the risks in commercial real estate.

Some REITS also hold mortgage-backed securities for access to real estate assets. The Fed has bought hundreds of billions of agent-issued MBS during the pandemic to help keep markets running.

Both Kaplan and Rosengren resigned in 2021 following revelations about the transaction. Kaplan said the disclosure risks becoming a distraction to the Fed, so he will retire. Rosengren said he had resigned due to health conditions.

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