In September 2021, The Wall Street Journal reported that Robert Kaplan, president of the Federal Reserve Bank of Dallas, made several million-dollar stock trades in 2020 while he had inside information about the Fed’s plans to bolster the U.S. economy and financial system as the COVID War began.
The same month, Kaplan resigned from the Federal Reserve, as did Eric Rosengren, president of the Fed’s Boston bank, after he was found to have made several trades in real estate trusts during the same period.
In the wake of the scandal, the Fed tightened its ethics rules. However, neither the U.S. justice department nor the Securities and Exchange Commission has sought to take action against Kaplan.
We covered what was the most publicized financial scandal in the Fed’s 109-year history in “Bankster Bandits Get Richer Playing the Inside Track” (14 Sep 2021) and “Criminality in High Finance: the Beat Goes On” (9 Nov 2021).
However, the breadth of Kaplan’s breach of ethics—if not the law—was not revealed at the time, according to an investigation by Wall Street on Parade (WSOP).
According to Kaplan’s trading records, which WSOP obtained from the Dallas Fed, he had been making million-dollar trades in Standard & Poor’s stock index futures during his entire five-year tenure at the bank.
Futures prices are easily swayed by Fed policy announcements, which Kaplan could easily have had advance access to, and often would have had, while he was president of one of the Fed’s banks.
During 2020, while Kaplan was at the Fed, the central bank made a series of dramatic policy shifts on interest rates, bond purchases, and emergency loan programs that shored up stock prices.
For example, the Dow Jones Industrial Average lost 30 percent in late March, then set an all-time high in November 2020, due largely to Fed policy moves.
Kaplan’s numerous futures trades were approved by the Dallas Fed’s general counsel at the time, who also was the bank’s ethics officer.
On his financial disclosure forms, Kaplan just wrote “multiple” on the line that asked him to list the specific dates of his trades.
Listing specific dates could have pinpointed his trades to dates on which the Fed made, but did not yet announce, key policy decisions, which could have been evidence of insider trading.
Earlier in his career, Kaplan had been a certified public accountant with Peat Marwick Mitchell, one of the “Big Eight” global accounting firms. As such, he should have known not to play fast and loose with the manner in which financial disclosure forms are required to be completed.
To date, the Fed has refused to disclose the specific dates of Kaplan’s trades, despite requests from WSOP and other news outlets, as well as from Senator Elizabeth Warren.
In 1995, the Fed’s ethics rules for employees forbade “speculative dealings.”
The rules published in 2021 make no mention of speculative dealings, WSOP noted.
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.”
In February this year, the Fed tightened its ethics rules to clamp down on Kaplan-style trading.
Warren and Fed watchdog Better Markets have called for the justice department to investigate Kaplan’s trades as possible violations of regulations barring insider trading.
So far, the department has shown no sign of acting.
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.
Gated communities will increase in popularity, and more private security will be hired by the haves who will be gangland targets.
TRENDPOST: As we had noted, back in December 2021, the Securities and Exchange Commission fined the brokerage arm of JPMorgan Chase $125 million, the largest fine ever levied for violations of SEC rules requiring brokerages to document communications and make such records available to regulators.
Having access to such records is essential to the SEC’s function of protecting investors and the market’s integrity.
These communications, involving salespeople, traders and bankers, were once conducted on recorded phone lines or messaging software that was digitally archived, but now take place via cell phones and encrypted apps.
The bank conveniently failed to see that employees kept records of those communications, with the failure predating the work-from-home revolution.
The same type of communications violations had figured in the earlier justice department case against JPMorgan, and the firm had been on probation and under a Deferred Prosecution Agreement that required the bank to stay out of trouble.
Before this new guilty verdict last week, JPMorgan had previously admitted to five felony counts brought by the justice department since 2014, all related to market-rigging, and had paid more than $920 million in fines.
The government even sued the bank for falsely reporting it was in compliance with its agreements with the justice department, according to a December 2021 Wall Street on Parade (WSoP) article.
JPMorgan allegedly used complex, convoluted, confusing, and outright false record-keeping to obfuscate and conceal its alleged improprieties, the WSoP reported; the lawsuit alleges that to carry out the deception, JPMorgan kept, in essence, two sets of books.
Throughout what WSoP calls “this serial crime wave at the largest federally-insured bank in the United States,” nobody went to jail, no other actions were taken, and JPMorgan’s chairman and CEO, Jamie Dimon, and his board of directors not only kept their jobs, but Dimon was praised by the bank for his leadership and awarded a series of eight-figure annual bonuses.
This long and ugly history of criminality and deception reveals the internal culture over which Dimon reigns: make money at all costs and treat laws as inconveniences to ignore or outsmart.
That culture will continue until the fines charged exceed the profits made through wrongdoing.
If violating laws and rules still leaves a profit after the fines are paid, and no one goes to the slammer, then penalties will remain just another cost of doing business.
Again, it is a slap on the wrist for the “One big club, and you ain’t in it,” and prosecution to the fullest for the average citizen who commits a minor crime.