Senator Reverend Warnock Applauds Federal Reserve for Adopting Ethics Rules Banning Trading by Senior Officials, Follows Legislation and Scrutiny in Senate Hearing

Statement

Today, U.S. Senator Reverend Raphael Warnock (D-GA), a member of the Senate Banking Committee and Chair of the Subcommittee on Consumer Protection and Financial Institutions, applauded the Federal Open Market Committee's new rules concerning the investment and trading activity of senior officials.

These new rules would ban senior Federal Reserve officials, their spouses, and their minor children from investing in individual corporate stocks or funds that focus on specific industries entering derivative contracts, purchasing securities on margins, or shorting a stock. It would also ban holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies.

"Public officials shouldn't use their positions for personal gain--ever. Hardworking Georgia families need to know that Federal Reserve officials are making decisions in the public interest, not in the interest of their pocketbooks," Senator Reverend Warnock said. "I thank the Federal Open Market Committee for heeding my calls to ban officials from participating in stock trading. We need a fair and impartial Federal Reserve to protect every Georgian and ensure we have an economy that works for all Americans."

On September 28, 2021, Senator Warnock pressed Federal Reserve Chairman Jerome Powell on reports that Regional Federal Reserve Bank presidents were actively trading private investments while the bank was intervening in the markets. He secured a commitment from Chairman Powell to review the trades at issue and revisit the rules and regulations governing trading by Federal Reserve Officials.

Following the hearing, on October 27, 2021, Senator Warnock introduced the Ban Conflicted Trading at the Fed Actwith Senate Banking Committee Chairman Sherrod Brown and other colleagues to prohibit senior Federal Reserve officials from trading individual stocks.

A champion for ethics reform across the federal government, Senator Warnock also introduced legislation to ban stock trading by members of Congress and their senior staff. He also cosponsored bipartisan legislation prohibiting members of Congress from holding stocks and legislation requiring members of Congress to hold their investments in blind trusts, which would mean that legislators would have no knowledge or control over their investments, preventing any holding from causing a potential conflict of interest.

Watch video of the hearing HERE and see below a transcript of Senator Warnock's exchange with Chairman Powell:

Senator Warnock: "Thank you so very much. Thank you so much, Mr. Chairman, and thank you, Chairman Powell and Secretary Yellen, for being here.

Yesterday, it was reported that the Regional Federal Reserve Bank presidents in Dallas and Boston are resigning following earlier reports that they were actively trading their private investments while the bank was intervening in the markets. Throughout the COVID-19 pandemic, many experts have underscored the importance of maintaining the independence of the Central Bank. Independence, of course, is necessary before the pandemic, after the pandemic, during the pandemic.

Even though neither serves now as voting members of the Federal Open Market Committee, this is a blow to the image of the Central Bank serving as an impartial and independent agency charged with maintaining stability in pricing and employment. Chairman Powell, what immediate actions have you taken to ensure the impartiality of the Fed, and what systems already that are in place failed here and how do you plan to fix them going forward?"

Mr. Powell: "Our need to sustain the public's trust is the essence of our work. We want the public to understand that we work for all Americans. So we do not like to be having these concerns raised. It is really something that is very, very concerning. So as soon as I learned of it, I directed our staff to undertake a review of our practices.

We have had in place a set of practices around investments and trading and disclosure that seems to have worked for a long time, only it is clearly really not working now, and we understand now that we need to raise modifier practices and we are in the process of creating ideas and recommendations for that. That is one thing that we are doing. We are also looking carefully at the trading that was done to make sure that it is in compliance with our rules and with the law."

Senator Warnock:"The rules seem to have broken down. Do you think there needs to be any changes in the trade?"

Mr. Powell: "Yes. I am 100 percent sure there is a need for those and there will be. I do not know precisely what they will be, but the appearance is just obviously unacceptable. Even if, as appears to be the case, these trades were in compliance with the existing rules, that just tells you the problem is that the rules and the practices and the disclosure needs to be improved and that is what we are working on. We will rise to this moment and address this forthrightly."

Senator Warnock:"I agree. Confidence in the Central Bank is essential, and I look forward to working with you on this issue and also working with Chairman Brown, who is working on legislation."

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