Warren said the trades “reflect atrocious judgment by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”
Following Warren’s letter, the Fed issued a statement Monday evening saying it began discussions last week with the Fed’s Office of Inspector General to initiate an independent review of “whether trading activity by certain senior officials was in compliance with both the relevant ethics rules and the law.”
“We welcome this review and will accept and take appropriate actions based on its findings,” a Fed spokesperson said in the statement.
A Fed spokesperson said Clarida’s financial disclosures for 2020, which were released publicly in mid-May, shows transactions that represent a “preplanned rebalancing of his accounts,” similar to a rebalancing he did and reported in April 2019.
“The transactions were executed prior to his involvement in deliberations on Federal Reserve actions to respond to the emergence of the coronavirus and not during a blackout period. The selected funds were chosen with the prior approval of the Board’s ethics official,” the spokesperson said.
“If these trades were based on Fed officials’ knowledge of non-public, market moving information, they may have represented potentially illegal activity,” Warren wrote in her letter.
Powell said last week that the Fed knows it needs to revamp its rules and officials are “looking carefully” at the trading to make sure it was done in compliance with rules and the low.
“It’s really not working now. We understand that,” Powell said of the Fed’s existing rules. “The appearance is obviously unacceptable.”
The SEC declined to comment.