Raphael Bostic, president of the Federal Reserve Bank of Atlanta, has amended his most recent financial disclosure report after revealing he had failed to list transactions that violated a Fed rule limiting trades ahead of the central bank’s rate-setting meetings.
He also failed to report trades he made during the height of the Fed’s flurry of policy changes in 2020 as it sought to keep the economy functioning as the COVID lockdowns spread, he admitted.
In addition, Bostic owned more treasury securities than Fed rules allow.
Many of the trades occurred after the U.S. Federal Reserve’s governing board sent a letter to regional banks’ ethics officers directing them to ensure that bank officials halt unnecessary trades while the Fed was actively intervening in markets.
The trades and other investment decisions were not made by him but by investment managers without his involvement, Bostic said in a press statement.
“At no time did I authorize or complete a financial transaction based on nonpublic information or with any attempt to conceal or sidestep my obligations of transparent and accountable reporting,” Bostic added.
The Atlanta Fed’s board said it accepted Bostic’s explanation. However, the Fed’s in-house investigator will review the details, the central bank announced.
“Bostic’s failure to correctly report activity in his portfolio underscored how lax Fed oversight of its officials’ financial habits has historically been,” The New York Times noted.
The annual disclosure forms filed by Fed bank presidents have not been routinely posted online and guidelines about making them public vary among the banks.
Bostic’s revelations follow a scandal that broke last September when it was revealed that Robert Kaplan, president of the Dallas Fed, had not disclosed a series of stock trades he made in 2020 while the central bank was busy in the markets.
At the same time, Eric Rosengren, president of the Boston Fed, was found to have carried out financial transactions of questionable timing.
We detailed the scandals in “Bankster Bandits Get Richer Playing the Inside Track” (14 Sep 2021).
The trades by Kaplan and Rosengren were not reported, violated no laws, and complied with federal regulations, the NYT said, but the transactions raised questions about the officials’ judgment and the Fed’s ethical standards, which seem to allow the possibility or appearance that senior Fed officers could profit from inside information.
Both officials insisted they did nothing illegal; both resigned their positions soon after.
The twin embarrassments prompted the Fed’s board to ask the central bank’s inspector general to investigate the trades and also those of Fed vice chair Richard Clarida. The inquiry also looked into financial dealings by a Powell family trust.
The inspector’s office found no evidence that Clarida or Powell “violated laws, rules, regulations, or policies related to trading activities” by Fed officials, it said in an 11 July memorandum to Senator Elizabeth Warren, which we reported in “Warren Rebukes Fed Chair Powell” (16 Aug 2022).
Last week, Warren expressed renewed indignance over Bostic’s missteps.
“This is an alarming failure by president Bostic and further evidence of the depth of the ethics problem at the Fed,” she said in a statement.
Powell has asked the Fed’s inspector general to “initiate an independent review of President Bostic’s financial disclosures,” the bank said in a public statement. “We will take appropriate actions based on [the] findings.”
TREND FORECAST: When powerful agencies are allowed to set their own rules and police themselves, bad things happen, as the Fed’s recent serial financial misbehaviors prove once again.
The Fed’s internal oversight will remain lax until Congress authorizes clear, strict regulations governing Fed officials’ financial behavior and demands regular reports and accountability… which we forecast will never happen from the crime-syndicate-in-charge.