The Federal Reserve imposes new restrictions on investments after trading controversy

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Federal Reserve Chairman Jerome Powell testifies at a House Financial Services Committee hearing on Capitol Hill in Washington, D.C., on Sept. 30. The Fed announced new restrictions on investments by senior officials after being rocked by a controversy involving trading by two regional Fed bank presidents last year.

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Broad-based investments such as mutual funds are still allowed, but they must be held for at least a year. Additionally, any purchase or sale must be approved 45 days in advance, and reported to the public within 30 days.

Fed chairman Jerome Powell said the rules — covering both the central bank and the regional Fed banks — are designed to guard against even the appearance of conflicts of interest.

«These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,» Powell said in the statement.

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The front of the Federal Reserve building in Washington, D.C. is seen in this photo from Dec. 24, 2006. Powell said its new trading restrictions on senior officials were intended to raise the public’s confidence on the Fed.

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Sen. Elizabeth Warren, D-Mass., greets Powell before a Senate Banking, Housing and Urban Affairs Committee hearing on Sept. 28. Warren has been a strong critic of Powell, saying he has not been tough enough on banks.

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He argued that trading restrictions should apply not just to senior staff but anyone at the Fed with access to non-public information. What’s more, he said senior leaders should be barred from trading entirely, and required to put their investments in a blind trust.

Kelleher also demanded a fuller accounting of trades that occurred in the past.

«The Fed has to stop stonewalling the many requests to disclose all the information and documents about the trading that has been done during the pandemic,» Kelleher said.

The Fed’s Inspector General is conducting an independent review.

Powell had already been facing some opposition to his reappointment. Sen. Elizabeth Warren, D-Mass., called him a «dangerous man» to lead the Fed, saying he has not been tough enough on bank regulations.