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Fed Leaders Eric Rosengren, Robert Kaplan to Resign Following Trading Controversy
Dallas Fed President Kaplan said his stock trading distracted from the work of the central bank
Boston Fed President Eric Rosengren cited health reasons in saying he would retire nine months early.
PHOTO: STEVEN SENNE/ASSOCIATED PRESS
The Federal Reserve banks of Boston and Dallas said their presidents were resigning, following reports of the two leaders’ investment trading that prompted calls for their departures and a central-bank review of its ethics rules.
The two banks gave different reasons for the exits. Dallas Fed President Robert Kaplan, a 64-year-old who is resigning effective Oct. 8., acknowledged in a statement released by the bank that his stock trading distracted from the Federal Reserve’s work.
The Boston Fed said its president, Eric Rosengren, also 64, would retire Thursday, about nine months early, citing health reasons. He said in a statement released by the bank that he was leaving as he had qualified for a kidney transplant to deal with a long-running condition.
In most cases, regional Fed leaders must retire at 65.
Mr. Rosengren’s decision follows the recent disclosure that he traded stocks and other investments related to the real-estate industry last year while also helping to set monetary policy. Disclosure forms for Mr. Kaplan showed many millions of dollars in trading in stocks and investments such as stock-market futures and interest-rate funds taking place since he became Dallas Fed president in 2015. While central-bank disclosure forms require officials to provide dates for trading, Mr. Kaplan’s form referred to “multiple” dates and his bank has declined to provide any transaction dates.
The central bank said recently that it would undertake a review of its ethics rules and make changes as needed, and Fed Chairman Jerome Powell at a press conference last week declined to voice clear support for the two Fed leaders.
‘We need to have the public’s trust, we need to hold ourselves to the highest ethical standards.’
“No one on the [Fed’s rate-setting committee] is happy to be—to be in this situation, to be having these questions raised. It’s something we take very, very seriously,” Mr. Powell said then.
Both men separately arrived at their own decision without being forced to resign by the chairman, according to people familiar with the matter.
Mr. Rosengren’s announcement, shortly before 8:30 a.m. on Monday, that he would accelerate his planned retirement put Mr. Kaplan on the hot seat. Throughout Monday, it became clear that Mr. Rosengren’s exit would only intensify the scrutiny on Mr. Kaplan’s trading activity.
Both men resigned one day before Mr. Powell is slated to appear before the congressional committees that oversee the Fed.
New York Fed President John Williams on Monday expressed support for the ethics review. “We need to have the public’s trust, we need to hold ourselves to the highest ethical standards,” and the current review will help ensure that is the case, he said in a virtual appearance Monday.
Dallas Fed President Robert Kaplan disclosed many millions of dollars in trading in stocks and investments.
PHOTO: COLE BURSTON/BLOOMBERG NEWS
“We stand ready to adopt any changes around financial rules of disclosure or anything like that” because “we need to make sure that people understand that we’re working all the time in the interest of the public, and we need to have policies and restrictions to support that,” he said.
The two officials’ trading activities were made public via annual disclosure forms released by each of the 12 regional Fed banks at the start of the month, and earlier reported by The Wall Street Journal. The forms detail the financial holdings and any trading done by the policy makers over the prior calendar year.
Mr. Powell said last week after the reports: “I was not aware of the specifics of what they were doing.”
The 12 regional Fed banks are quasi-private institutions that are overseen by the Federal Reserve Board of Governors in Washington. The regional banks have private boards of directors. They collect economic information, engage in community development work and, in the case of the New York Fed, they are responsible for the implementation of monetary policy.
The regional Fed bank presidents are selected by their boards with the oversight of the Fed in Washington.
All 12 regional Fed banks leaders were reappointed to new terms at the start of this year in a process that was overseen by Fed governor Lael Brainard.
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