The U.S. Federal Reserve continues to withhold details about its most notorious public scandal in recent history.
In 2020, as the U.S. Federal Reserve was cutting interest rates and shaping policies to lubricate the economy and keep businesses alive during the COVID War, two Fed bank presidents were trading stocks and securities that they later failed to report on their mandatory financial disclosure forms.
Robert Kaplan, president of the Federal Reserve Bank of Dallas, made 24 stock trades, each worth $1 million or more during the period.
Kaplan traded shares of companies affected by 2020’s economic chaos and resulting Fed policies, including medical supplier Johnson & Johnson and several oil and gas companies.
He also bought bonds of companies that the Fed later included in its own bond purchases as part of its economic rescue effort.
In addition, Kaplan allegedly made his trades through Goldman Sachs, where he was vice-chair before joining the Fed. Goldman Sachs could have had a legal or ethical obligation to refuse or report the trades but has remained mum and refuses to respond to reporters’ inquiries about the trades.
Eric Rosengren, president of the Fed’s Boston bank, also made trades he failed to disclose.
The violations of rules governing financial disclosure were revealed in an investigation by Wall Street on Parade (WSoP) and detailed exclusively in the Trends Journal articles “Bankster Bandits Get Richer Playing the Inside Track” (14 Sep 2021) and “Fed’s Insider Trading Bandits Get Free Ride” (20 Sep 2022), among others.
Soon after The New York Times bannered the secret trades on its pages, Kaplan and Rosengren resigned their positions while claiming their actions fell within Fed guidelines.
Guidelines published in 1995 banned Fed officials from engaging in “speculative dealings.”
Revised rules set out in 2021—after Kaplan and Rosengren made their questionable trades—makes no mention of “speculative dealings.”
However, ethics guidelines for 11 of the Fed’s 12 regional banks in 2021 stated that employees “have a responsibility to avoid conduct that places personal gain above duties to the Bank, which gives rise to an actual or apparent conflict of interest, or which might result in a question being raised regarding the independence of the employee’s judgment or the ability to perform the duties of his or her position satisfactorily.”
The harsh publicity following the Kaplan-Rosengren exposé prodded Fed chair Jerome Powell to task the central bank’s inspector general (IG) to investigate whether the trades were criminal.
Powell also ordered a review and revision of the Fed’s rules governing officials’ financial behavior.
Under the new rules, Fed governors, senior staff, and regional bank presidents will be allowed only to invest in diversified products such as mutual funds and are barred from trading in instruments of individual companies.
After several months, the IG’s office wrote a letter to Powell clearing Kaplan and Rosengren of any wrongdoing. Their actions fell within federal regulations and did not constitute “insider trading”—making trades based on information not available to the public—the letter said. (See “Warren Rebukes Fed Chair Powell” 16 Aug 2022).
Insider trading is a crime that has sent lifestyle celebrity Marth Stewart and arbitrage billionaire Ivan Boesky, among others, to prison.
After the letter was made public, U.S. Senator Elizabeth Warren (D-MA) wrote to Powell accusing the Fed of cloaking information the public has a right to know.
The IG’s report “raises new concerns about the reasons why you continue to withhold key information about Fed officials’ financial trading activity from Congress and the public,” Warren wrote in her 11 August, 2021 letter.
Warren also sent letters to all 12 federal reserve banks, asking that records of all financial transactions by senior Fed officials since 1 January 2020 be sent to the committee by 25 August, 2021.
“My ongoing concerns about the culture of corruption at the Fed have become more extensive with each new revelation and with each additional failure by the Fed to provide the information needed by Congress and the public,” she wrote.
Warren was not alone in her frustration.
After the Fed refused the Senate banking committee’s requests for documents in another matter, Republicans on the committee threatened to introduce legislation that would compel the Fed to comply with such requests.
“Obstructionism has become a too-common response from the Fed and regional Fed banks—which, after all, are creatures of Congress—to oversight inquiries from members of both parties,” 11 Republican committee members wrote in a 9 August, 2021 letter to Powell.
The Fed has remained intransigent in its secrecy.
On 17 May this year, the Fed’s IG Mark Bialek testified before the Senate banking committee and was once again dressed down by Warren.
“You have had a year and a half,” Warren reminded him. “You did not call out the trades that we can see. This is not strong oversight. In fact, it is not even competent oversight.
“It looks like, to anyone in the public, that you gave your boss a free pass and that’s not going to cut it here.
“Even today, the Fed continues to stonewall Congress, stonewall the public on the underlying information about these trades.
“This is why we are pushing for an independent IG,” she said.
The Fed’s IG is appointed by the central bank’s chair, reports to the chair, and serves at the pleasure of the chair.
Even more startling, the brief of the Fed’s IG is to oversee only the Fed’s board of governors. Apparently, Bialek had no authority to probe financial dealings by Fed regional bank presidents, according to a new WSoP investigation, much less to clear them of wrongdoing.
A bipartisan group of senators is exploring ethical and oversight reforms for the Fed, including making the central bank’s IG a presidential appointment to be confirmed by the Senate.
The Fed’s secretive handling—or mishandling—of the entire incident “highlights the crazy, weird, Byzantine nature of the Fed,” political scientist Sarah Binder at George Washington University, author of a book on Fed politics, said in a 2021 New York Times interview.
“It’s almost impossible to keep the rules straight, the lines of accountability straight,” she said.
TRENDPOST: As we noted in “The Federal Reserve Mob: Gangsters Inc.”(11 Jan 2022), although lawmakers have called for an investigation into the Kaplan-Rosengren debacle by the Securities and Exchange Commission, which would have the power to bring criminal charges, it is likely that the any of the Fed’s inside trading Bankster Gang will suffer anything but embarrassment (if they’re capable of that).
TREND FORECAST: Other than Wall Street on Parade, there is virtually zero coverage of these dirty Bankster deals. And as we note, it is prosecution to the fullest for We the Little People of Slavelandia for minor offense while the Bigs get a slap on their wrist for committing billion-dollar dirty deals.
As the global economies decline and the rich get richer, prepare for our “OFF WITH THEIR HEADS 2.0” trend we forecast back in December 2019, when there was a global rise in anger directed at the 1 percent, that was already spreading globally prior to 2020’s COVID War, to accelerate.
Those demonstrations that were sweeping much of the globe were halted when the government used the COVID War to restrict street protests.
As Gerald Celente has long noted, “When people lose everything and have nothing left to lose, they lose it.” And many are “losing it.” With the rich getting richer, the elites become more “elite’ and there will be uprisings to bring them down.
With the gap between the rich and poor widening, so, too, will the animosity between the “haves” and “have nots.” And as the Bigs keep getting bigger, income inequality will be a key platform in the formation of new political parties across the globe.