The Fed’s main job is to deal with monetary policy, but there are a few slip-ups here and there, and sometimes it doesn’t even have to do with their policy. Recently, we discussed the Fed scandal where it was uncovered that 2 regional Fed Presidents, Robert Kaplan of Dallas, and Eric Rosengren of Boston, were making trades and investments on their personal accounts through individual stocks, which made people angry as they were involved with the Fed policy such as interest rates. They have resigned since due to public backlash, but it has put Fed Chair Jerome Powell’s renomination chances in a pickle.
Now, they have decided to take permanent action against this case of insider trading per say by passing a new rule. Now, Fed officials are banned from owning individual stocks, and individual bonds too. Derivative contracts are also banned. They will need to provide a 45-day advance notice before they perform a legal transaction, and that list is dry. One of the only legal transactions is investing in certain mutual funds, and there are restrictions to that too. Lawmakers in Washington are happy with the new rules, and it brings up a rule that Democrats want to place on senators so that they can’t trade stocks. Lawmakers oversee fiscal policy, and we saw an instance in early 2020 when 2 Georgia senators essentially committed insider trading. These rules should help Powell’s case for renomination with the Democrats, and his biggest critic Elizabeth Warren has failed to comment. Do you think these rule changes are fair?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.