Powell is committed to ensuring that the Fed never again has a trading scandal – News Couple
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Powell is committed to ensuring that the Fed never again has a trading scandal


Federal Reserve Chairman Jerome Powell said he would “do whatever it takes” to prevent central bank officials from conducting financial transactions that would lead to a conflict of interest.

“It means everything to me that we do whatever it takes to make sure something like this doesn’t happen again,” Powell said at a news conference on Wednesday.

In September, the central bank was engulfed by a scandal centered on big financial bets made by regional Federal Reserve chairs Robert Kaplan and Eric Rosengren. Both resigned after reporting bets on real estate and individual stocks.

[Read: A timeline of the Federal Reserve’s trading scandal]

Weeks later, Powell installed a “broad set of new rules” that restrict any active trading, effectively allowing only the purchase of diversified investment vehicles such as mutual funds.

In addition, the central bank’s inspector general is investigating deals made by senior Federal Reserve officials to see if there are rules or laws that have been violated. The Securities and Exchange Commission (SEC) declined to say whether it was investigating the matter.

Powell said he has briefed administration officials and members of Congress on the Fed’s ethics rules, adding that he is still asking for opinions on further changes.

“If there are better ideas, I’d love to hear them. I think we’ve gotten off to a good start so far,” Powell said on Wednesday, adding that the whole episode was a “bad streak” for the independent central bank.

Re-nomination decision looms

The Fed chair told reporters Wednesday that it was “too early” to gauge the impact of the trading disaster on the public’s perception of the Federal Reserve.

“And we are who we are. It happened and we just have to deal with it openly and transparently and own it and step up to face this moment, I am fully committed to doing it,” Powell said.

But the optics may influence White House thinking about whether or not Powell will get another four-year term as central bank chief. Powell’s term as president ends in February next year, and President Joe Biden said on Tuesday he plans to release the Fed’s list of nominations “fairly quickly.”

Fed watchers appear to be inclined towards renaming Powell, and the Predict bet still shows Powell as the preferred candidate over current Fed Governor Lyle Brainard. However, market watchers warn of continued uncertainty.

“In this divided political environment, anything is possible,” said Adel Zaman, partner at the Wall Street Alliance Group.

For his part, Powell declined to comment on whether or not he had spoken with the president or his economic advisers about the prospects for a re-nomination.

Brian Cheung is a reporter covering the Federal Reserve, the economy and banking at Yahoo Finance. You can follow him on Twitter Tweet embed.

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