The Federal Reserve managed to swiftly sweep its house of regional presidents Robert Kaplan of Dallas and Eric Rosengren of Boston after The Wall Street Journal's expose on their questionable trades and potential conflicts of interest.
However, as the White House begins to deliberate the re-nomination of Federal Reserve Board Chairman Jerome Powell, Kaplan's and Rosengren's trades are not going to be the only ethical considerations to consider at the Fed.
This is according to an article in the WSJ, titled "Trading Furor Complicates White House Decisions on Fed Leadership."
The chances for the well-liked, moderate Powell, a Republican, to be renominated are only "dented but not derailed" by the questionable trades, according to the WSJ. However, a closer look at the facts laid out in the story indicate otherwise.
Should the White House decide that the regional presidents' trades are emblematic of systemic ethical violations at the Fed, the Biden administration might very well pass on Powell's renomination. If that happens, the paper says, Senate Democarts are likely to turn to economist Lael Brainard, a Federal Reserve governor, as Powell's successor.
Sen. Elizabeth Warren (D-Mass.) last week called on the Securities and Exchange Commission to look further into the Kaplan's and Rosengren's trades, regardless of their employment status at the Federal Reserve. In May, Sen. Warren also called out mutual fund trades by Federal Reserve Vice Chairman Richard Clarida, which occurred right at the beginning of the COVID-19 global pandemic outbreak. In those very early days, before the federal government stepped in with trillions of COVID relief, the U.S. markets plummeted more than 30%.
Sen. Warren has noted how other U.S. senators bailed out the the stock markets days before news of the COVID-19 lockdowns and their devastating economic impact. The senator also recently told Congress Powell is "a danergous man" who has not been fully on the side of the American banking system. In the past, Warren has called the Wall Street investing sytem "rigged" against the investing public.
Complicating Brainard's nomination, the WSJ says, is the fact Brainard is one of the individuals at the Federal Reserve Board responsible for ethical oversight.
For its past, last week, the Federal Reserve said it has asked its internal inspector general's office to conduct an independent review of its trades.
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