Risk & Compliance

Fed Regional Chiefs Resign Amid Ethics Outcry

The trading activities of Robert Kaplan and Eric Rosengren raised questions about whether they were "acting for personal profit" as Fed policymakers.
Matthew HellerSeptember 28, 2021

Two top U.S. Federal Reserve officials have resigned amid an outcry over personal investment activities that raised ethical concerns.

The resignations of Robert Kaplan, president of the Dallas Fed, and Eric Rosengren, president of the Boston Fed, came less than two weeks after the public disclosure of their trading prompted Fed Chair Jerome Powell to order a “comprehensive” review of the Fed’s ethics rules.

“The recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of [its] vital work” determining monetary policy, Kaplan said in announcing he will retire effective Oct. 8 after six years as Dallas Fed chief.

Rosengren said he was moving up his “long-planned” retirement from June 2022 to Sept. 30, citing a kidney condition.

Powell commended both Kaplan and Rosengren for their service to the Fed but The New York Times said the controversy “has pushed him into a delicate position” as he seeks reappointment. The trading disclosures “risk chipping away at the widespread trust he has been working to build,” the Times said.

According to the disclosures, Kaplan made multiple trades worth $1 million or more last year in individual stocks including Apple, Amazon, and Delta Air Lines while Rosengren held stakes worth at least $151,000 in four real estate investment trusts.

“Critics said the trading raised questions as to whether the men were setting monetary policy with the nation’s well-being in mind, or whether they were acting for personal profit,” The Wall Street Journal reported.

Rosengren has warned publicly about risks in the commercial real estate market and was helping to set Fed policy on mortgage-backed security purchases, which can help the housing market by improving financing conditions.

Better Markets, a group that pushes for tighter financial regulation, said “merely letting Rosengren resign nine months early” was not an adequate response to the “pandemic profiteering trading at the Fed.”

“The Fed’s attempt to sweep this scandal under the rug and move on only proves once again that the Fed needs significantly more transparency, oversight, and accountability imposed on it,” the group said in a news release.