A recurring theme in Trends Journal has been the insider trading shenanigans of the Federal Reserve’s top officers. While “shenanigans” may seem too mild a term for the ethical breaches allegedly committed, so far about the worst price any of these Bankster Bandits has had to pay for their corruption has been being compelled to resign, tantamount to a slap on the wrist.
We wrote about two of the Fed’s regional presidents, Robert Kaplan of the Dallas district and Eric Rosengren of the Boston district, both of whom “decided to take an early retirement” last September amid revelations that they had personally profited from trading in the same kind of instruments the Fed had been purchasing to shore up the economy; see “CRIMINALITY IN HIGH FINANCE: THE BEAT GOES ON” (9 Nov 2021).
The Fed’s role in stimulating the economy gave its officers advance and inside information; Kaplan allegedly used that information to make 24 stock deals, each worth $1 million or more.
And we wrote about how even the Fed’s chairman, Jerome “Jay” Powell, had come “under scrutiny” for activities which, while approved by government ethics officers, had the potential to undermine confidence in the Fed; see “FEDERAL RESERVE’S CHAIRMAN COMES UNDER SCRUTINY” (26 Oct 2021).
TRENDPOST: Another recurring theme is the way the Fed, as an institution, seems to circle its wagons and protect its officers when allegations of malfeasance surface, as in the case of Powell having the blessing of the Fed’s supposed internal watchdogs.
It reflects the corporate mindset at the Fed; because they’ve taken such a significant pay cut to work for the government, its officers are granted “leeway” to keep active portfolios and maintain their income from trading, above and beyond their meager public servants’ salaries, so long as their personal interests don’t impact, or take advantage of, public policy.
The Fed claims to have ethical standards, but those standards place very few restrictions on the investments its senior officers can make. Even so, apparently sometimes the lure of taking advantage of inside information is too hard to resist.
Now comes word that another top-Fed mob memberr, Vice-Chair Richard Clarida, has made additional disclosures about certain trades he made, which involved selling between $1 million and $5 million worth of stocks, and then buying back those same stocks 3 days later, allegedly taking advantage of Fed policies that had caused the stocks’ price to fall over that period. And, shortly after he bought them back, the stocks’ price rose again.
The new disclosures call into question his original explanations about the trades, which he had characterized as a routine “rebalancing” of his holdings.
A Fed spokesman claimed that “inadvertent errors” necessitated “amending” Clarida’s initial disclosures, and that the trades conformed to the Fed’s ethics rules. And a Fed ethics officer said “I continue to believe that Mr. Clarida is in compliance with applicable laws and regulations governing conflicts of interest.”
But Norman Eisen, who had been the chief ethics lawyer for the Obama White House, remarked, “Frankly, I don’t understand how selling out of a fund, failing to disclose that, then buying the same fund again, all while making a profit and having sensitive Fed information, constitutes a ‘rebalancing’.”
TRENDPOST: Although lawmakers have called for an investigation by the Securities and Exchange Commission, which would have the power to bring criminal charges, it doesn’t seem likely that the any of the Fed’s inside trading Bankster Gang will suffer anything but embarrassment (if they’re capable of that); see “FED ETHICS? FU!” (21 Sep 2021).
UPDATE: Yesterday, Richard Clarida, whose term as Vice-Chair of the Federal Reserve was set to expire later this month, said he will resign on Friday.