Two Regional Federal Reserve Presidents To Step Down: What You Need To Know

Two regional Federal Reserve presidents — one from Boston, the other from Dallas — are retiring after “embarrassing revelations” of their engagements in the stock market, according to Bloomberg. 

What Happened: Boston Fed Chief Eric Rosengren and Dallas Fed Chief Robert Kaplan separately announced they would step down from their positions. Rosengren will leave this week, while Kaplan is resigning Oct. 8. Both men were criticized for conflict of interest after they released their 2020 financial disclosures 

“Rob made the decision to retire as President and CEO of the Bank, effective October 8 to eliminate any distractions to the Federal Reserve System surrounding his personal investment activities,” stated a press release from the Federal Reserve Bank of Dallas. 

Rosengren is retiring because of health-related problems, according to a press release from the Federal Reserve Bank of Boston. 

“In a message to the Bank’s staff, Dr. Rosengren revealed for the first time that he qualified for the kidney transplant list in June of 2020, during the pandemic, upon the worsening of a kidney condition he has had for many years,” the release states.

“Delaying the need for dialysis might be improved if he makes lifestyle changes now to lessen the risks of his condition.”

Why It Matters: While he praised both of the presidents for their service, Fed Chairman Jerome Powell was not pleased by the news of their 2020 transactions and ordered a review of the central bank’s internal ethics rules on financial holdings. 

“No one on the FOMC (Federal Open Market Committee) is happy to be in this situation, to be having these questions raised,” Powell told the New York Times, adding, “This is an important moment for the Fed and I’m determined that we will rise to the moment.”

Both Kaplan and Rosengren bought and sold stocks last year. While the transactions were OK under the Fed’s guidelines, their decisions still could have been affected by the Fed’s decisions during a time when the central bank was especially involved in buoying financial markets.

Each leader pledged to sell their individual stocks and no longer trade individual stocks. 

When the news was originally released, U.S. Sen. Elizabeth Warren (D-MA) wrote an open letter to several Federal Reserve regional banks calling for more oversight on the dealings of those working at a central bank. 

“The controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” she wrote.

Photo: Lance Anderson via Unsplash.