Richard H. Clarida, vice chairman of the Federal Reserve, announced Monday that he would resign from his post two weeks earlier than expected. Although he didn’t give a reason, he had come under scrutiny for transactions he made in 2020 as the central bank was on the verge of saving financial markets.
“With my statutory term as governor expiring on January 31, 2022, I am writing to inform you that I intend to resign from the board of directors on January 14, 2022”, wrote Mr. Clarida in a letter to the president. . Biden that the Fed released on Monday.
The New York Times reported last week that Mr Clarida corrected his financial information for 2020 at the end of December. Ethics experts said one of his updated transactions raised questions – he sold an equity fund on February 24 before buying it back on February 27, just before the Fed chairman announced. on February 28 that the central bank was ready to help the markets and the economy.
His first statements had only noted the purchase of the equity fund, which the Fed had described in its name as a planned portfolio rebalancing. But the rapid move out and back of stocks called that explanation into question, some experts said, and the buyout could have put Mr. Clarida in a position to benefit as the Fed reassured markets.
Neither the Fed nor Mr. Clarida provided a new explanation for the transactions, although the Fed’s ethics office noted in the updated record that they always appeared to be in compliance with conflict of interest laws.
Mr Clarida’s updated disclosure garnered widespread media coverage and the attention of lawmakers. Massachusetts Senator Elizabeth Warren called on the Fed on Monday to release more information on the transactions of senior Fed officials in light of the news.
The amended disclosure and the rush of attention came at an inopportune time for Jerome H. Powell, the Fed chairman, who was reappointed to his post by Mr. Biden. He is due to appear Tuesday at a confirmation hearing before the Senate Banking Committee.
Ms Warren sits on the banking committee, so Mr Powell is always pretty sure he is wondering why some Fed officials traded so actively as the markets turned and the Fed staged a huge bailout at the start of the pandemic.
“The whole story of rebalancing, which just collapses over the fact that it sold and then bought,” said Simon Johnson, an economist at the Massachusetts Institute of Technology. “If you’re President Powell, you don’t want your reconfirmation hearing to focus on that. “
Mr Powell and his colleagues have revamped the central bank’s ethical guidelines in recent months – issuing plans in October to revise them and prevent many types of financial activity, including trading in times of turmoil. He can point out that this shows how seriously the Fed has taken the issue.
Mr Clarida’s resignation is the latest development in a months-long trade scandal that has involved senior officials and prompted high-profile departures at the Fed.
Financial information released in late 2021 showed Robert S. Kaplan, the former chairman of the Federal Reserve Bank of Dallas, had made large transactions in individual stocks, while Eric S. Rosengren, the former president of the Boston Fed, had traded real estate securities. These measures prompted an immediate and intense reaction from lawmakers, ethics experts and former Fed employees.
Fed officials actively rescued a wide range of markets in 2020. In March and April, they cut rates to zero, bought mortgage and government bonds en masse, and implemented debt bailouts. businesses and municipalities.
The concern is that continuing to process the affected securities for their own portfolios throughout the year could have given managers the opportunity to benefit from their insider knowledge.
Mr. Kaplan resigned in September, citing the scandal; Mr Rosengren resigned simultaneously, citing health concerns.
Mr. Clarida’s term was to end at the end of this month because his seat as governor was expiring. Bloomberg News first reported on his purchase of equity funds – which was visible before he corrected the disclosure – in October.
Although Mr Clarida did not address the trade issues in his resignation letter, he referred to them indirectly during a speech late last year.
“I have always fulfilled honorably and with integrity of public service obligations,” he said. said in mid-October.
the The Fed’s government watchdog investigating those responsible for transactions made in 2020 and Ms Warren has requested an investigation from the Securities and Exchange Commission. The SEC does not comment on whether such investigations are ongoing.
Mr. Clarida has served as Vice President since 2018, and during that time he has been a close associate of Mr. Powell’s and a valued Second-in-Command. His speeches were closely watched by Wall Street for the political signals they often offered, and he was praised for his skills as a clear and careful communicator.
He also led a campaign to revamp the Fed’s policy-making framework to make it more jobs-oriented and better suited to the challenges of the modern economic age, a hallmark of the Fed’s first term. Mr. Powell.
“I will miss his wise advice and vital ideas,” said Mr. Powell in a statement announcing the early departure of Mr. Clarida.