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"Based on our findings, we are closing our investigation" into
the pair's investment activities from 2019 to 2021, the Office
of the Inspector General said.
A separate investigation into the two regional Fed bank
presidents whose investments touched off the public outcry to
begin with is ongoing, it added, signaling that at least one
more chapter in the saga remains to be written.
The four-page memo posted to the OIG's website was the result of
a nine-month investigation by the independent watchdog following
the disclosure last September that Dallas Fed President Robert
Kaplan and Boston Fed President Eric Rosengren had been actively
engaged in the financial markets in 2020.
That was the year the central bank launched a barrage of rescue
programs and bond purchases to stem the economic fallout from
the pandemic, and critics raised questions about potential
conflicts of interest and propriety.
Both policymakers said they complied with then-current ethics
rules. Both then retired early. Powell requested an independent
probe, and set about revamping rules around Fed policymaker
trading and investment.
Powell's own investment portfolio came under scrutiny, and
Clarida drew separate public fire in late December after he
corrected a previous financial disclosure to show he traded in a
stock fund in February 2020 as the Fed was about to intervene in
markets.
The inspector general said it reviewed relevant records, Board
email accounts, financial disclosure reports, brokerage
statements and other trading data, as well as conducted
interviews with "relevant individuals" as part of its
investigation.
It did find that Clarida failed to report several trades on
required disclosure forms and that a financial adviser for the
Powell family trust executed five trades during the sensitive
period around a Fed policy-setting meeting, when trading is not
allowed.
But "we did not find evidence to substantiate the allegations
that former Vice Chair Clarida or you violated laws, rules,
regulations, or policies related to trading activities as
investigated by our office," the OIG said in the memo, dated
July 11 and addressed to Powell.
Clarida said the watchdog "determined conclusively that I did
not violate any statutes, rules, regulations, or standards."
Clarida left his post in January, a couple of weeks before his
term was up.
“He did not act with inside information. That’s exactly what
they were looking for, exactly the purpose of the
investigation,” said Tony Fratto, a Clarida spokesperson.
Better Markets, a nonprofit advocating stronger financial
regulation, said the report missed the mark, charging that its
scope of review was too narrow and that it was not credible
because the inspector general is hired by the Fed chair, rather
than independently appointed.
The Fed early this year adopted an extensive set of restrictions
on trading by policymakers and senior Fed staff to prevent any
future issues, barring among other things any trading during
periods of market stress and banning the holding of individual
bonds and the purchase of individual stocks.
(Reporting by Ann Saphir in San Francisco and Lindsay Dunsmuir
in ScotlandEditing by Jonathan Oatis and Matthew Lewis)
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