Friday, October 22, 2021

There is no industry more corrupt than the financial industry

The Federal Reserve will ban policy makers and other senior officials from buying individual stocks and bonds and will also restrict active trading after an ethics scandal led to the departure of two regional presidents and undermined confidence in the central bank.

Under the new policies, senior Fed officials — including regional bank presidents, Washington governors and senior staff — will be limited to purchasing diversified investment vehicles such as mutual funds, the central bank said in a statement Thursday.

Other rules “to help guard against even the appearance of any conflict of interest in the timing of investment decisions” include providing 45 days’ advance notice for buying and selling securities, obtaining prior approval for such transactions and holding investments for at least one year. Additionally, “no purchases or sales will be allowed during periods of heightened financial market stress,” the Fed said.

  alJazeera
The back story:
Robert Kaplan, president of the Dallas Federal Reserve Bank, in 2020 traded millions of dollars of stock in companies such as Apple, Amazon, and Google, while Eric Rosengren, president of the Boston Fed, traded in stocks and real estate investment trusts, according to financial disclosure forms. Both pledged last week to divest those holdings after they were reported by The Wall Street Journal.

Comments made by Fed regional presidents can move markets and they have a hand in the Fed’s interest rate policies. Such high-placed officials often have exclusive access to discussions about upcoming policy shifts that could benefit or be detrimental to some economic sectors.

[...]

Both Kaplan and Rosengren said last week that their trades were permitted under the Fed’s ethics rules. But they also said they would sell their holdings the end of this month and place the money in index funds, which track a wide range of securities, or in cash.

[...]

The Fed has come under criticism for worsening wealth inequality by pushing up the value of stock portfolios.

The Fed’s purchase of mortgage-backed bonds, which are issued by mortgage buyers such as Fannie Mae and Freddie Mac, has been criticized by some other regional bank presidents for contributing to the run-up in home prices in the past year.

[...]

In a prepared statement Thursday, the Fed said that Chair Jerome Powell late last week requested a “fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials.”

The statement came after letters were sent Wednesday by Sen. Elizabeth Warren, a Democrat from Massachusetts, to all 12 regional Fed banks, urging that they ban the ownership of stocks by senior officials.

[...]

Warren has introduced legislation that would bar stock ownership by members of Congress, Cabinet Secretaries, and other high-ranking officials.

  PBS
Warren's raison d'etre has been financial industry reform. She seems to be pretty much alone.

No comments: