Federal Reserve Vice Chairman Richard Clarida left his post early following the emergence of questions surrounding trades he made at the beginning of the pandemic. His early departure must have been prompted by the controversy, though he did not mention it or admit to any deliberate wrongdoing in announcing his resignation. Trading activity at the Fed has been the target of intense scrutiny in recent months.
Fed Vice Chair leaves early
In February 2020 Clarida moved millions of dollars from a bond fund into a stock fund. The Fed Vice Chair claimed that this was a preplanned “rebalancing” of his portfolio.
That rebalancing just happened to occur the day before Chair Jerome Powell announced that the Fed was prepared to begin aggressive economic measures as the pandemic crisis emerged.
Last month Clarida supposedly found a mistake in disclosing his transactions, revealing that he had in fact been selling millions of a stock before buying the same stock a few days later.
Clarida has had a key role in deciding policy at the central bank over the last few years; among other initiatives, he contributed efforts to expand diversity and inclusion.
Now he has taken his interest in diversity at the Fed to new heights, stepping down as Vice Chair to be replaced by Lael Brainard, a woman.
Senator Elizabeth Warren, who has been vocal about wanting both Clarida and Powell replaced, has accused top leadership at the Fed of engaging in insider trading.
New ethics rules established
Clarida is not the first high-ranking official at the Fed to resign after being accused of making questionable trades in the early days of the pandemic.
In response to the criticism, Powell has announced that there will be sweeping changes to conflict-of-interest rules for high-ranking officials.
The new rules will prevent Fed leaders from making the kinds of active trades which sparked the criticism of Clarida and others.
They will instead be limited to investing in mutual funds and other passive options. 45 days notice and approval from internal ethics reviewers will be required before buying and selling.
Fed leaders will also have to hold on to their investments for at least a year before being allowed to sell. This policy overhaul may be Powell’s attempt to appease Senator Warren and other critics.
He has not joined in condemning his former Vice Chair. Powell praised Clarida’s contributions to the Fed and stated that he “will miss his wise counsel and vital insights.”
