The Federal Reserve is reviewing the ethics policies that cover the financial holdings of its senior officials in the wake of disclosures that two regional Fed presidents engaged in extensive trading last year.
FILE - This May 4, 2021 file photo shows the Federal Reserve building in Washington. The Federal Reserve said Thursday, Sept. 16, that it is reviewing its ethics policies governing senior officials' financial holdings, in the wake of disclosures that two regional Fed presidents engaged in extensive trading last year.
Comments made by Fed regional presidents can move markets and they have a hand in the Fed's interest rate policies. Such high-placed officials often have exclusive access to discussions about upcoming policy shifts that could benefit or be detrimental to some economic sectors, though they are prohibited from trading on that knowledge and are unable to trade in the period leading up to Fed meetings.
One impact of those policies has been to make stocks a more attractive investment relative to bonds, which provide very little return when interest rates are low. The Fed has come under criticism for worsening wealth inequality by pushing up the value of stock portfolios. “The controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” Warren's letter said. Warren has introduced legislation that would bar stock ownership by members of Congress, Cabinet Secretaries, and other high-ranking officials.
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