November 07, 2022

Senator Warren Increases Pressure on Fed for Public Transparency Amid Latest “Egregious and Embarrassing” Ethics Breach

Raises “fresh questions about the culture of corruption at the Fed and [Chair Powell’s] unwillingness or inability to address it” “Your failure to uphold suitable standards of ethics at the Fed, and your failure to provide a transparent review of this string of ethics breaches have undermined public confidence in the Fed and hindered its ability to conduct its mission”

Text of Letter (PDF)

Washington, D.C. — United States Senator Elizabeth Warren (D-Mass.) sent a letter to Federal Reserve (Fed) Chair Jerome Powell raising concerns about the culture of corruption at the Fed and renewing requests for information about the Fed’s recent ethics scandals, including all stock trades made by Fed governors and presidents from January 1, 2020. Senator Warren also asked new questions regarding the Fed’s policy around the agency’s latest ethics problem, non-public briefings by high-level officials. 

“It is highly disturbing – and emblematic of your failure to instill a culture of ethics at the Fed – that two new examples of Fed officials’ scandalous behavior could unfold even while the Fed had still been unable to provide an explanation for previous bad behavior,” wrote Senator Warren. “The revelations underscore my long-held concerns that Fed officials could be seen as profiting from their positions by leveraging sensitive information, and that they are overly cozy with the Wall Street banks they oversee.”

In September of last year, the Fed became embroiled in scandal when reports that then-Boston Reserve Bank Presidents Eric Rosengren and then-Dallas Reserve Bank President Robert Kaplan had been actively trading individual stocks and investments while helping set key Fed policies during the pandemic. Reports also described that in a March 23, 2020 email, Fed officials were warned by ethics officials to avoid trading.

The following month, news broke that Vice Chair Richard Clarida had traded out of a bond fund and into stock funds one day before Chair Powell issued a statement announcing the Fed would be prepared to use its tools as the pandemic worsened. 

Last month, Atlanta Federal Bank President Raphael Bostic reported that he “failed to previously disclose financial transactions on his official central bank forms – including ones that ran afoul of Fed rules that limit trading ahead of Federal Reserve meetings.” He also failed to initially disclose transactions that took place during the height of the central bank’s coronavirus response in 2020.

Just days after reports of Mr. Bostic’s trading activities were revealed, it was reported that St. Louis Reserve Bank President James Bullard participated in an invite-only, off-the-record talk with Wall Street investors amid a highly uncertain global economic outlook. 

To date, Senator Warren has sent four letters to Chair Powell requesting that the Fed publicly release additional information about its trading scandal, but the Fed has failed to adequately respond.

“These two new incidents – one involving improper stock trading by a Federal Reserve Bank President and the other a closed-door, off-the-record meeting with Citigroup investors by another Reserve Bank President  – raise fresh questions about the culture of corruption at the Fed and your unwillingness or inability to address it,” wrote Senator Warren.

Sen. Warren highlighted the multiple times that Chair Powell has refused to provide Congress with information about the scandals. “By refusing to release the information I have repeatedly requested regarding the Fed’s ethics failures, you are preventing Congress and the public from evaluating the full extent of trading in individual stocks by Fed officials, the extent to which Fed officials were warned of the risks from their trading, and whether the plans you announced to reform the Fed’s ethics practices are sufficient to prevent future conflicts of interest,” concluded Senator Warren. 

Senator Warren requested that Chair Powell assume responsibility and respond fully to a series of inquiries no later than November 21, 2022.

Senator Warren has long championed stronger ethics rules that prohibit all government officials from holding or trading stock that may be influenced by their agency, department, or actions. She previously sent letters to Chair Powell on August 11, 2022, January 10, 2022, December 7, 2021, and October 21, 2021, and requested that the Fed publicly release additional information about its trading scandal, but the Fed has failed to adequately respond. In March of this year, she also submitted three questions for the record (QFR) to Chair Powell following up on her previous requests. She submitted an additional QFR in June of this year asking that Chair Powell comment on a report that the Fed had not released updated financial disclosures for the former Reserve Bank presidents whose trading activity triggered the ethics scandal.

As the ethics scandals involving top level Fed officials unfolded in September and October of 2021, Senator Warren called out the culture of corruption at the Fed and raised deep concerns over conflicts of interests that have undermined public confidence in the Federal Reserve System. She previously called on the SEC to investigate the extent of trading activity by high-level Federal Reserve officials and possible ethics violations. She also urged Regional Fed leaders to follow the robust and comprehensive ethics guidelines in her Anti-Corruption and Public Integrity Act