Federal Reserve Chair Jerome Powell on Tuesday said new financial trading rules for top officials at the central bank will be in place “imminently.”
The Fed announced new rules in October amid reports that some top officials had made investment decisions at the outset of the COVID-19 pandemic, when the central bank was allocating trillions of dollars in emergency relief efforts to try and stabilize financial markets and bolster the economy.
The new rules, once implemented, will prohibit members of the Fed Board of Governors, presidents of the 12 regional reserve banks and senior staff members from purchasing individual stocks, bonds or securities backed by federal agencies, in addition to trade derivatives.
Officials under the jurisdiction of the rules will also be required to report plans to purchase or sell securities 45 days in advance and receive approval, then have to hold the investments for a year. They will not be allowed to make any changes to their portfolios during times of financial volatility.
They will, however, be permitted to invest in mutual funds and other diversified investment productions that are commonly used in 401(k)s and other retirement savings accounts.
Asked when the new rules will be implemented during his confirmation hearing before the Senate Banking Committee on Tuesday, Powell said, “imminently.”
“We’ve tried to take care and write them correctly, they’re complex. We have to hire people, we’ve got to build systems and we’ve got to write rules, so we’ve been hard at work at that since October,” Powell said.
“We’re ready to move ahead with that and I would think it’s in the very near future,” he added.
The Fed in October said the rules would be applied “over the coming months,” but it did not identify when.
Powell’s updated timeline came one day after Federal Reserve Vice Chair Richard Clarida announced that he would be resigning from his post. He did not explain why he had decided to depart the bank two weeks earlier than initially planned, but the news did come days after The New York Times reported that Clarida did not disclose the degree of financial transactions he made in early 2020, when talks regarding the coronavirus were underway.
The vice chair did not report that he sold stocks on Feb. 24, when financial markets were dwindling amid report of COVID-19 spreading, according to the Times. He reportedly bought back those holdings on Feb. 27, which previously came under scrutiny because it was one day before Powell said the central bank was ready to take action amid coronavirus concerns.
The Fed also came under scrutiny after reports surfaced regarding controversial investments former Dallas Fed President Robert Kaplan and former Boston Fed President Eric Rosengren made in March and April of 2020. Both of the officials announced resignations in September of last year.
Powell on Tuesday said the old ethics guidelines in place for central bank officials have become “insufficient,” adding that the new rules are “easily the toughest in government.”
“The old system was in place for decades on end and then suddenly it was revealed as insufficient, and so we do take the need to protect our credibility with the public very seriously and I think our new system is easily the toughest in government and the toughest I’ve seen anywhere,” he said.