Federal Reserve Vice Chair Richard Clarida said Monday he will leave fourteen days before his term terminates, following new disclosures about his stock exchanging just before a significant central bank declaration in mid 2020. Clarida, 64, will leave the Fed’s Board of Governors on Jan. 14, in front of the lapse of his term as governor on Jan. 31, as indicated by a letter to President Joe Biden, who picked Fed Governor Lael Brainard as vice chair in November. The note made no notice of Clarida’s exchanging.
While the purchase transaction was previously disclosed and reported by Bloomberg News in October, the sale of the fund shares was first included in an amended financial-disclosure form filed with the government last month.
His unexpected early departure — in the shadow of an ethics scandal that engulfed the Fed last year — follows reports last week that Clarida had sold at least $1 million of shares in a U.S. stock fund in February 2020 before buying a similar amount of the same fund a few days later. The following day, Chair Jerome Powell signaled the central bank was preparing aggressive action to buffer the economy and financial markets from the coronavirus.
“Rich’s contributions to our monetary policy deliberations, and his leadership of the Fed’s first-ever public review of our monetary policy framework, will leave a lasting impact in the field of central banking,” Powell said in a statement Monday.
Last fall, two regional Fed chiefs announced their departures following revelations about their trading activity. One of the presidents, Eric Rosengren of Boston, said his resignation was due to a serious health condition.
The course catalogue at Columbia University, where Clarida is a professor, showed him listed as teaching there again this semester.
Powell announced new investment guidelines in October, including banning purchases or sales during periods of market stress. A probe of Fed trading is under way by the central bank’s inspector general, which declined to comment on whether Clarida is part of the investigation.
The resignation will raise questions about the scope of the inspector general’s investigation and controls around ethics rules, even though the Fed has revised them. A Fed ethics officer, in a letter attached to Clarida’s amended filing, said the vice chair was “in compliance” with laws and regulations regarding conflicts of interest. “It is a really big stretch for the ethics officers to be defending these transactions,” said Kaleb Nygaard, senior research associate at the Yale Program on Financial Stability. “This is an issue of public confidence.”
A Fed spokeswoman declined to comment beyond the ethics officer’s letter appended to Clarida’s amended disclosure. Clarida has been a member of the board and vice chair since September 2018. The Senate Banking Committee will hold a hearing on Brainard’s nomination on Thursday, two days after Powell appears before the panel to discuss his nomination for a second term as chair.
Suspicious Aura Roberto Perli, a former Fed economist and partner at Cornerstone Macro LLC, said he believed the vice chair’s stock-trading activity was in good faith, but it leaves an aura of suspicion around his motives.
“This revelation is just the latest evidence of a deep-rooted ethics failure at the Fed and the urgent need for a comprehensive information release about officials’ trading activity,” Warren wrote. ‘Questions Remain’
Senator Elizabeth Warren, who opposes Powell’s renomination, cited the latest report on Clarida in a letter to Powell earlier Monday, where she reiterated her request for the Fed to release all available information on trades by central bank officials. “I don’t know if that’s the reason for his early resignation, but if it is, Clarida did the right thing for the good of the institution, as anyone would expect of him,” Perli said. “I wouldn’t discount the possibility that he left for other reasons. The last few weeks at the Fed are more a formality than anything else.”
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