Fed Policymakers Recommit to Strong Ethics in Wake of Two Lapses

Federal Reserve Chair Jerome Powell said 19 policymakers this week recommitted to following the highest ethical standards in the wake of two recent lapses.

“The public’s trust is really the Fed’s — and any central bank’s — most important asset,” Powell told reporters Wednesday in Washington following the end of a two-day Federal Open Market Committee meeting where policymakers decided to raise rates by 75 basis points.

“And any time one of us — one of the policymakers — violates or falls short of those rules, we do risk undermining that trust. And we take that very seriously.”

The central bank has faced renewed criticism over its ethics standards following two recent incidents that have brought additional scrutiny. Atlanta Fed President Raphael Bostic on Oct. 14 revealed he violated central bank policy on financial transactions, leading Powell to ask the Fed’s inspector general to review his financial disclosures.

In a separate incident, St. Louis Fed President James Bullard last month attended a Citigroup Inc.-hosted meeting in Washington to which media were not invited and at which he discussed monetary policy. The St. Louis Fed has since said it would think differently about accepting such invitations in the future.

‘Good System’

“We had a committee discussion of the full committee on the importance of holding ourselves individually and collectively accountable for knowing and following the high standard that’s set out in our existing rules with respect to both personal investment activities and external communications,” Powell said.

Powell said that the Bostic error was discovered as part of a review by the board’s new process to scrutinize financial disclosures.

“So it’s a really good system,” he said. “We recommitted to each other and to this institution to hold ourselves to the highest standards and avoid these problems.”

Following the Bostic disclosure, Senator Elizabeth Warren, a Massachusetts Democrat, said the revelations show “an alarming failure by President Bostic and further evidence of the depth of the ethics problem at the Fed.”

Some economists said the Bullard speech appeared to violate the FOMC’s internal guidelines stating that participants “will strive to ensure that their contacts with members of the public do not provide any profit-making person or organization with a prestige advantage over its competitors.”

The Fed overhauled its ethics rules in 2021 after revelations about unusual trading activity during 2020 by several senior officials as the central bank slashed interest rates to nearly zero and unleashed emergency lending programs to protect the economy as the pandemic spread.

Then-Dallas Fed President Robert Kaplan and his Boston colleague Eric Rosengren both announced their early retirement following the revelations, with Rosengren citing ill health.

Powell said he didn’t have an update on the IG probe of Rosengren and Kaplan’s trading.

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