A money manager acting on behalf of Rafael Bostic, president of the Federal Reserve Bank of Atlanta, bought and sold shares in 19 exchange-traded funds on May 2 this year, a date that fell within the Fed’s “blackout period” during which Fed officials are forbidden to make trades.
The blackout period begins two weeks before the next meeting of the Fed’s rate-setting Open Market Committee. Bostic is not a voting member of the committee this year.
Bostic had run afoul of the central bank’s trading rules in March and April 2020, as we detailed in “Another Fed Bankster Bandit Caught Violating Financial Disclosure Rules” (19 Oct 2022).
At that time, Bostic 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.
As he did then, Bostic now claims that this year’s trades were made without his knowledge or input by a money manager who has discretion over his and his wife’s funds.
Bostic said the trades were made before he realized they would be subject to the blackout rule.
His trades have been reported to the Atlanta bank’s ethics office and the Fed’s inspector general, who is investigating, Bloomberg said.
Following news of their breaches, in 2021 the Fed tightened its rules governing officials’ financial trades, limiting them to the purchase of diversified holdings such as mutual funds and banning hands-on trading.
TRENDPOST: Bostic’s latest violation is emblematic of the lax attitude Fed officials have to the rules governing their behavior.
The Fed has been dogged by ethics blunders, not only by Bostic but by former Dallas Fed president Robert Kaplan and ex-Boston Fed president Eric Rosengren. We reported their lapses in “Bankster Bandits Get Richer Playing the Inside Track” (14 Sep 2021) and “Fed’s Insider Trading Bandits Get Free Ride” (20 Sep 2022), among other articles.
The Fed’s meeting dates are listed publicly months in advance. It should not be difficult for Bostic to pass them to his financial manager and tell him or her not to trade two weeks before any of those dates.
Instead, like his colleagues Kaplan and Rosengren, Bostic seems to have decided that the rules are like wallpaper—something nice for people to look at but not to look to for meaning.
Too many Fed officials have shown that they will ignore rules that carry no real consequences for violating them. The Fed—or Congress, if the Fed will not—must establish clear, inflexible consequences for violating disclosure and other rules, including fines and, ultimately, dismissal.