US Senator Warren blasts Fed for withholding business records | Financial market news

US Senator Elizabeth Warren has chastised Federal Reserve Chairman Jerome Powell for withholding information about central bank officials’ transactions during the pandemic and said an investigation into the matter by the inspector general of the Fed was “troublesome”.

The IG report “raises new concerns about why you continue to withhold key information about the financial trading activities of Fed officials from Congress and the public,” the Massachusetts Democrat said in a letter. to Powell released Thursday.

Warren — a member of the Senate Banking Committee who has oversight powers over the Fed — also sent letters to the 12 Reserve Banks requesting securities transaction records for all senior officials since Jan. 1, 2020, giving the banks a deadline of August 25.

Warren’s request to the Board and the Reserve Banks marks growing dissatisfaction with the central bank’s responses to its chief oversight body in Congress. This week, Republican members of the Senate Banking Committee, in response to a separate case in which the Fed refused to share documents with lawmakers, pledged to create legislation that will require the Fed to disclose certain information to Congress.

Although Republicans and Democrats requested different information from the Fed, both sides expressed frustration at being blocked following repeated requests.

Trade 2020

Warren’s criticism centers on financial disclosures for 2020 that revealed swaps by some officials at a time when the Fed was intervening in nearly every major credit market to try to cushion the economic downturn caused by the pandemic. Reserve bank officials included Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, who have since resigned.

“My lingering concerns about the culture of corruption at the Fed have grown more prominent with each new disclosure and each additional failure by the Fed to provide needed information to Congress and the public,” Warren wrote.

While the 12 Reserve Banks are exempt from Freedom of Information Act requests, including lawmakers, the Board is not. Both Warren and Republican Sen. Pat Toomey said they had requested information directly from the Council on several occasions and had not received responses they felt were appropriate. Members of the Senate Banking Committee have expressed interest in subjecting reserve banks to FOIA.

“Unfortunately, obstructionism has become an all too common response by the Fed and regional Fed banks – which, after all, are creatures of Congress – to demands for Congressional scrutiny from members of both parties” , wrote 11 Republican members of the committee in an August 15 article. 9 letter to Powell.

New rules

The 2020 trades of some Fed officials exposed the central bank’s weak internal oversight and outdated rules. Powell ordered a review of the rules and the Fed has since adopted strict limits on how senior officials can invest.

The Fed Board has asked the IG to investigate the dealings of Kaplan, Rosengren, as well as former Vice Chairman Richard Clarida. The Fed IG also independently reviewed the transactions of a Powell family trust.

The IG cleared Clarida and Powell, saying there was no evidence that they “violated any laws, rules, regulations or policies related to business activities.”

Warren raised several concerns about the inspector general’s report on Powell and Clarida, which comes in the form of a July 11 “memorandum.”

The senator noted that the IG report, for example, did not address “the fact that the Ethics Unit of the Board of Governors issued a warning against wasteful transactions to Fed officials on March 23, 2020. “, although some officials have made transactions.

“These shortcomings in review and the IG’s gullible acceptance of explanations for clearly inappropriate behavior render the conclusions of the IG report simply not credible,” Warren said in her letter to Powell.

Kaplan, a former senior Goldman Sachs Group Inc. executive, listed multiple-stock trades with trades of $1 million or more on “multiple” dates in 2020.

Bloomberg News requested the specific dates of the transactions via FOIA and was denied.

Rosengren’s disclosure listed interests in four separate real estate investment trusts and disclosed multiple purchases and sales of those and other securities. These investments raised concerns as he had publicly warned of the risks of commercial real estate.

Some REITs also hold mortgage-backed securities to gain exposure to real estate assets. The Fed purchased hundreds of billions of agency-issued MBS during the pandemic to help the market function.

Kaplan and Rosengren both resigned in 2021 after the trade revelations. Kaplan said the revelations risked becoming a distraction for the Fed, so he retired. Rosengren said he quit due to a health issue.

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