Whatever It Takes: Powell Commits to Ensuring Trading Scandal Never Happens Again at Federal Reserve

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Federal Reserve Chairman Jerome Powell said that he would “do whatever it takes” to stop central bank officials from making financial transactions that would present conflicts of interest.

“It means everything to me that we do whatever it takes to make sure that nothing like this happens again,” Powell said in a press conference Wednesday.

In September, the central bank became engulfed by a scandal centered on big financial bets made by regional Fed Presidents Robert Kaplan and Eric Rosengren. Both stepped down from their roles after reporting revealed bets on real estate and individual stocks.

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

Weeks later, Powell would install a “broad set of new rules” restricting any active trading, effectively only allowing purchases of diversified investment vehicles like mutual funds.

Additionally, the central bank’s inspector general is investigating the trades made by those senior Fed officials to see if there were rules or laws broken. The Securities and Exchange Commission (SEC) has declined to say if they were 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 soliciting feedback on making further changes.

“If there are better ideas, I’d love to hear them. But I think we have so far made a good start,” Powell said Wednesday. He added that the whole episode “was a bad appearance” for the independent central bank.

Renomination decision looms

The Fed chief told reporters Wednesday that “it is too soon” to gauge the impact of the trading debacle on the public’s perception of the Federal Reserve.

“We are where we are. It happened and we just have to deal with it forthrightly and transparently and own it and step up to meet this moment, I’m totally committed to doing that,” Powell said.

But optics may be impacting the White House’s thinking on whether or not Powell will get another four-year term as the head of the central bank. Powell’s term as chairman ends in February of next year, and President Joe Biden said Tuesday he plans on announcing a slate of Fed nominations “fairly quickly.”

here’s that Biden quote, in response to @jeneps, on making an announcement on Fed nominations “fairly quickly.” He added later that he and his economic advisers have “a lot of good choices” pic.twitter.com/KGt3jItSyA

— Brian Cheung (@bcheungz) November 2, 2021

Fed watchers appear to tilt toward a Powell renomination, and betting website PredictIt still shows Powell as the favorite over existing Fed Governor Lael Brainard. Still, market watchers are warning that uncertainty remains.

“In this divided political environment, anything is possible,” said Aadil Zaman, a 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 renomination.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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