Banking and Finance Law Daily Wrap Up, TOP STORY—Warren asks Powell for information on officials’ trades, Fed ethics policy, (Jan 11, 2022)

By Nora Macaluso

Vice Chair Richard Clarida announced his resignation following questions about the timing of a trade he made ahead of a Fed announcement early in the pandemic.

Senator Elizabeth Warren (D-Mass) has asked Federal Reserve Chairman Jerome Powell to release within the next week detailed information about Fed officials’ trades and c ...

By Nora Macaluso

Vice Chair Richard Clarida announced his resignation following questions about the timing of a trade he made ahead of a Fed announcement early in the pandemic.

Senator Elizabeth Warren (D-Mass) has asked Federal Reserve Chairman Jerome Powell to release within the next week detailed information about Fed officials’ trades and changes to the Fed’s ethics policy.

“The Fed has failed to respond to two of my previous inquiries” regarding Fed officials’ trading activities during the early days of the pandemic, said Warren, chair of the Senate Banking Subcommittee on Economic Policy (see Banking and Finance Law Daily, Dec. 8, 2021). The lack of response is “even more troubling” in light of a recent New York Times report that said outgoing Vice Chair Richard Clarida “may have been trading on inside information related to planned policy moves,” she said.

Clarida announced his intention to resign from the Fed effective January 14. He did not give a reason, saying in his resignation letter that he was “proud and honored” to have made a contribution to Fed policy.

The Times reported that Clarida sold shares in a stock fund as the market was plunging early in 2020, then purchased shares in the same fund two days later—just before the Fed announced it was prepared to protect the economy from pandemic-related disruption. The Fed, according to the Times, said Clarida amended his disclosure to reflect the trades after noticing “inadvertent errors.”

“The revelations raise concerns that Clarida may have been trading on inside information related to planned policy moves, and that the Fed has failed to disclose the full scope of officials' trading practices to the public,” Warren said (see Banking and Finance Law Daily, Oct. 28, 2021).

Warren sent a letter to Powell asking that the Fed respond to her request for information by January 17. Specifically, she asked for:

  • The full text of a March 23, 2020, email advising Fed officials on trading, along with any other “ethics advice or information” provided to Fed officials since Jan. 1, 2020.

  • Full disclosure of investment trades by Fed governors and presidents since Jan. 1, 2020.

  • A staff briefing on Fed rules announced in October 2021 regarding the purchase and trading of individual securities and the timeliness of Fed policymakers’ and senior staffers’ reporting and public disclosure.

  • Detail on when Fed officials first learned that Clarida made the “inadvertent errors” on his initial financial disclosure form, when he filed an amended form, and when the amended disclosure was made publicly available on the Office of Government Ethics website.

“I am deeply concerned that your continued refusal to release information about Fed officials’ trading is at odds with your stated commitment to address the scandal ‘forthrightly and transparently,’” Warren wrote in her letter.

Warren has said there is a “culture of corruption” at the Fed (see Banking and Finance Law Daily, Oct. 6, 2021), and has called on the Securities and Exchange Commission to investigate whether officials’ trades may have violated insider trading laws (see Banking and Finance Law Daily, Oct. 5, 2021). She has also sent letters to the heads of the 12 regional Fed banks, urging them to ban individual stock trading (see Banking and Finance Law Daily, Sept. 17, 2021).

Two regional Federal Reserve Bank officials—Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren—announced their retirements following reports that raised questions about their securities trades during the pandemic (see Banking and Finance Law Daily, Sept. 28, 2021).

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