The Federal Reserve is investigating Bostic’s trading after a period of suspended operations

The Federal Reserve is investigating Bostic's trading after a period of suspended operations
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Federal Reserve Bank of Atlanta President and CEO Raphael W. Bostic speaks at the European Financial Forum event on February 13, 2019 in Dublin, Ireland.

Clodagh Kilcoyne | Reuters

The Federal Reserve is investigating the restricted-period trades of Raphael Bostic, head of the bank’s Atlanta region.

After revelations over the past few years that there were multiple incidents of Bostich’s investment activity violating the Fed’s limits and blackout periods, the central bank said the Office of the Inspector General would look into the matter further. There have also been incidents of Bostic misrepresenting its assets.

Fed Chairman Jerome Powell “asked the Federal Reserve Board’s Office of Inspector General to begin an independent review of President Bostic’s financial disclosures,” a Fed spokesman said. “We await the results of their work and will take appropriate measures based on their findings.”

Trade has been a hot-button issue for Fed officials over the past few years. The revelations that multiple officials were involved in investment moves came before the early retirements of two regional presidents, Eric Rosengren of Boston and Robert Kaplan of Dallas, as the Fed took steps to support markets.

There were also revelations that Powell’s own traders were trading in 2020 bearish periods. Although the inspector general cleared both officials of wrongdoing, former vice president Richard Clarida’s trading also came into question.

The controversy also led to revised policy that severely limits what Fed officials can do.

Bostic said the violations in his case were not intentional and occurred because he trusted a third-party manager who managed his investments. He said his investments were in accounts that neither he nor his investment adviser could direct.

In issued a statement together with with amended disclosure forms, Bostic apologized for the controversy.

“I understand that it is my responsibility to understand and comply with each of the obligations of this office,” he said. “I want to be clear: I have never knowingly authorized or completed a financial transaction based on non-public information or in an attempt to hide or evade my obligation to provide transparent and accountable reporting.”

He also noted in his statement that the holding of Treasurys in 2021 exceeded the limits specified in the Fed guidelines. The Fed sets interest rates using the federal funds rate, which is generally closely related to Treasury yields.

Fed in place in February on previous arrangements added to the restrictions on what its members can do. The new rules prohibit senior executives from holding individual stocks, bonds and cryptocurrencies, among other assets. Those rule changes forced a review from both the Atlanta district and the Fed’s main DC operation, leading to the disclosure of Bostic’s filing errors.

“We welcome this review and will cooperate fully to ensure that this matter is resolved effectively,” the Atlanta Fed said in a statement.

Controversy over investment moves by Fed officials first followed reports in the Wall Street Journal that some members were trading during the early days of the Covid pandemic when policymakers were considering action.

The Fed cut benchmark interest rates near zero and launched an aggressive bond-buying program that added nearly $5 trillion to the central bank’s balance sheet.

“If my actions raise questions about my standards, conduct, or motivations, I sincerely regret, Federal
The Reserve Bank of Atlanta’s systems and processes to protect the public trust or the Federal Reserve’s commitment to transparency and accountability in carrying out its mission,” Bostic said.

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