Feds No. 2 official resigns due to trade scandal

But in one correction to his financial disclosure for 2020, Clarida said he had sold between $ 1 million and $ 5 million in the same equity fund three days before the purchase, indicating that he was actively trading. In the December 16 memo sent to the Office of Government Ethics, he referred to the exclusion of this information as an “unintentional error”.

The news created fresh questions about the Fed’s ethical rules, just before Powell prepared to have his confirmation hearing Tuesday before the Senate Banking Committee. Fed board member Lael Brainard, who has been asked to replace Clarida as vice president, is due to be heard on Thursday.

As Powell’s No. 2, Clarida has had a major hand in central bank interest rate decisions over the past few years, including a review of its policy framework designed to place greater emphasis on broad and inclusive employment.

“The Covid pandemic has taken a tragic human toll measured in lost lives and suffering, and by 2020 triggered a catastrophic collapse in economic activity and a rise in unemployment,” he said in a farewell letter to President Joe Biden. “I am proud to have served with my Federal Reserve colleagues as, in a matter of weeks, we launched historic policy initiatives that, together with fiscal policy, have steered the economy away from depression and supported a robust recovery in economic activity. and employment since. ”

Clarida’s trades came under scrutiny after Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren came under fire for revelations that they had bought and sold shares and real estate-related assets in 2020, when the central bank was involved in a comprehensive rescue of the financial markets. . Both men resigned within weeks of the firestorm.

In late October, Powell announced a major revision of the conflict of interest rules, saying that Fed policy makers and senior executives will be banned from trading and will only be able to buy diversified investment instruments such as mutual funds.

Under the new policy, central bank politicians and top staff must give 45 days notice and obtain prior approval from internal ethics staff for all purchases and sales. They must also hold all investments for at least one year.

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