August 11, 2022

Senator Warren Blasts Federal Reserve’s Culture of Corruption, Criticizes Inspector General’s “Credulous” Review of Fed’s Stock Trading Scandal

Renews Request for Release of Information on Fed Officials’ Trades

“Gaps in the review and the IG’s credulous acceptance of explanations for clearly improper behavior render the findings of the IG’s report simply not credible”

Text of Letter (PDF) | Text of Fed Regional Banks Letters (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to Federal Reserve Chair Jerome Powell raising concerns about the Federal Reserve’s  (Fed) Culture of Corruption, and the Fed Inspector General’s inadequate investigation of the trading activities by senior officials on the Fed Board of Governors. She renewed her requests for information about the Fed’s trading scandal, including disclosure of all trades made by Fed governors and presidents between January 1, 2020 and the present.  Senator Warren also sent letters to each of the presidents of the regional Federal Reserve Banks requesting this information.

In September, 2021, the Fed became embroiled in scandal amid reports that two Federal Reserve Bank Presidents – both of whom have since stepped aside – had actively traded individual stocks and other financial assets while helping set key Fed policies at the height of the pandemic. Last month, the Inspector General (IG)  released an investigation finding that former Vice Chair Clarida’s omitted disclosures and that trades involving Chair Powell’s accounts were made during what should have been a “blackout period.” The IG found clear evidence of improper trading activity by these officials, and yet it accepted uncritically the claims that these improprieties were inadvertent. The investigation, conducted by an IG that serves at Chair Powell’s discretion, was entirely inadequate, underscoring the need for the Fed to provide full and complete information about Fed officials’ trades during the pandemic to Congress and the public. 

“Simply put, the Fed’s refusal to answer basic questions is preventing Congress and the public from evaluating the full extent of Fed officials’ trading in individual stocks by Fed officials, the extent to which Fed officials were warned of the risks from their trading, and whether the plans you announced to change the Fed’s ethics practices are sufficient to prevent future financial conflicts of interest,” wrote Senator Warren.

In the letter, Senator Warren again calls for the Fed to provide the following information:

  • The full contents of the March 23, 2020 email and any other ethics guidance provided to Fed officials since January 1, 2020;
  • Information regarding the timing of former Vice Chair Clarida’s financial disclosure amendments;
  • Details about information sharing between the Board of Governors and the Reserve Banks in the time since the trading scandal broke;
  • A comprehensive list of any and all trades made by Fed governors and presidents between January 1, 2020 and the present and;
  • Information about the Fed’s instructions to former Reserve Bank presidents Eric Rosengren and Robert Kaplan in the final months and weeks of their tenure.

Senator Warren has long championed stronger ethics rules that prohibit all government officials from holding or trading stock that may be influenced by their agency, department, or actions. She previously sent letters to Chair Powell on October 21, 2021, December 7, 2021, and January 10, 2022 requesting that the Fed publicly release additional information about its trading scandal, but the Fed has failed to adequately respond. In March of this year, she also submitted three questions for the record (QFR) to Chair Powell following up on her previous requests. She submitted an additional QFR in June of this year asking that Chair Powell comment on a report that the Fed had not released updated financial disclosures for the former Reserve Bank presidents whose trading activity triggered the ethics scandal.

As the ethics scandals involving top level Fed officials unfolded in September and October of 2021, Senator Warren called out the culture of corruption at the Fed and raised deep concerns over conflicts of interests that have undermined public confidence in the Federal Reserve System. She previously called on the SEC to investigate the extent of trading activity by high-level Federal Reserve officials and possible ethics violations. She also urged Regional Fed leaders to follow the robust and comprehensive ethics guidelines in her Anti-Corruption and Public Integrity Act. 

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