Among other things, the Federal Reserve will ban senior officials from trading directly in stocks and bonds. They may still invest in, for example, investment funds.
The stricter rules resulted from a scandal that led to the resignation of two executives of the US umbrella organization of central banks. They turned out to be actively trading shares themselves.
Shortly after the investments came to light, Fed Chair Jerome Powell stated that the two ex-executives had not violated any codes of ethics. Still, there was a lot of commotion because the Fed’s policy greatly influenced the financial markets.
At least one of the two traded in May 2020, just after the central bank took extraordinary measures to support the US economy during the corona crisis. In fact, the Fed’s ethics office encouraged senior officials not to trade for several months.
Critics of Powell have seized on the scandal to block his potential reappointment as chairman for another four years. His current term ends in February. In addition, Democratic Senator Elizabeth Warren, one of Powell’s biggest opponents, has asked the Securities and Exchange Commission (SEC) regulator to investigate whether insider trading rules have been violated.
