White House says Biden has confidence in Fed’s Powell after ethics scandal
Fed presidents Eric Rosengren and Robert Kaplan resigned in September following disclosures
US President Joe Biden retains confidence in Federal Reserve chair Jerome Powell, a White House spokesperson said, after senator Elizabeth Warren assailed the central bank and its leader earlier on Tuesday.
“Yes, he does have confidence in Powell at this time,” a White House deputy press secretary, Karine Jean-Pierre, told reporters travelling with Biden aboard Air Force One.
Warren said in a Senate floor speech that Powell had “failed as a leader” following revelations about investment transactions in 2020 by Federal Reserve officials.
“For Fed officials to actively trade in the market raises legitimate questions about conflicts of interest and insider trading,” the Massachusetts Democrat said on Tuesday. “These Fed officials actually show, at a minimum, really bad judgment.”
She added that it’s “not clear why Mr Powell did not take steps to prevent these activities”.
The Fed is under fire following revelations about unusual trading activity by some senior officials last year as the central bank fought to shelter the US economy from Covid-19.
Warren has publicly opposed Powell’s renomination as Fed chief when his term expires in February. Warren is a member of the Senate banking committee, which approves Fed nominees before they go to the Senate floor for a vote.
Another member of the panel, Georgia senator Jon Ossoff, said there “must be a congressional investigation” of the trading. He said his support for a Powell renomination depends on “the quality of the Federal Reserve’s response to this issue and their co-operation with congressional investigations”.
Warren called Monday for the Securities Exchange Commission to investigate whether the transactions violated insider trading rules, citing an October 1 Bloomberg News report about trading by vice-chair Richard Clarida in his 2020 financial disclosures.
Clarida traded between $1m and $5m out of a bond fund into stock funds on February 27 2020, one day before Powell issued a statement flagging possible policy action as the pandemic worsened.
Separately, two regional Fed presidents recently announced their departures after reports about their trading activity. Eric Rosengren and Robert Kaplan, presidents of the Fed branches in Boston and Dallas, announced their resignations September 27 following disclosures. Rosengren cited a serious health condition in announcing his early retirement.
Kaplan disclosed multiple trades of more than $1m during 2020. Rosengren transacted in real estate investment trusts, including some that invested in mortgage securities that the Fed started buying in 2020, which also raised questions.
Powell, who is waiting to learn if Biden will nominate him for a second term, had already opened an internal examination of the central bank’s ethics rules. The Fed said on Monday that Powell has asked its inspector-general to conduct a review of the trades to make sure they were in compliance with Fed rules and the law.
Bloomberg News. More stories like this are available on bloomberg.com
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