Top Fed official says he broke central bank trading rules
Federal Reserve Bank of Atlanta President Raphael Bostic said Friday he had inadvertently broken the central bank’s trading rules.
New documents highlighted multiple violations. Bostic, who has led the Atlanta Fed for five years, made personal trades during blackout periods, when officials are prohibited from making financial transactions. The disclosures also show that Bostic previously filed incomplete information and that he held more than $50,000 in US Treasury funds last year, which exceeds the permissible limit.
Bostic is the latest in a slew of top officials to come under scrutiny for trading activity outside of the scope of the Fed’s strict rules. The ongoing scandal has already led to multiple resignations.
The revelations come at a crucial time for the Federal Reserve’s credibility. The central bank characterized inflation as “transitory” last year and has had to ramp up interest rate hikes this year at an aggressive pace to cool down the economy.
On Friday, Bostic said that the errors were due to a misinterpretation of central bank rules. He said he sought to correct his mistakes “as soon as I became aware that my financial reporting did not meet the expressed or implicit expectations necessary to maintain the public’s trust.”
The Fed president added that he did not make any trades based on insider knowledge and was not managing the investments himself.
“I recognize it is my responsibility to understand and abide by every obligation of this office,” Bostic said. “I want to be clear: at no time did I knowingly authorize or complete a financial transaction based on nonpublic information or with any intent to conceal or sidestep my obligations of transparent and accountable reporting.”
Two Fed presidents resigned last year after disclosures showed they had traded individual stocks in 2020, a period during which the Fed intervened in markets due to the pandemic-induced recession.
Powell responded by instituting widespread personal-investing restrictions on senior officials. It was during the implementation of these restrictions that Bostic’s violations came to light.
The Fed said Friday that Chairman Jerome Powell had asked its inspector general to conduct a review of Bostic’s transactions and that the central bank would take action based on the results of the investigation. But the Atlanta Fed’s board said it accepted Mr. Bostic’s explanation of his reporting mistakes on Friday.
“After reviewing the documents and discussing these issues with President Bostic and the Atlanta Fed’s chief ethics officer, the board acknowledges the violations and accepts President Bostic’s explanation,” Elizabeth Smith, the Atlanta Fed board chair, said in a statement.
That assurance wasn’t enough for Elizabeth Warren. “This is an alarming failure by President Bostic and further evidence of the depth of the ethics problem at the Fed,” wrote the Democratic Senator and frequent Fed critic in a statement. “It is also a predictable consequence of Chair Powell’s refusal to allow basic transparency or impose real rules that would put an end to this behavior. I’ll keeping working to advance anti-corruption legislation and restore the trust in the Fed that Chair Powell’s tenure is eroding,” she said.