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Warren Calls for Insider Trading Investigation at Fed After Scandal Emerges

Directly before pandemic policy changes were announced, the Fed’s vice chair made stock trades worth up to $5 million.

Sen. Elizabeth Warren speaks during a press conference with fellow lawmakers at the U.S. Capitol on September 23, 2021, in Washington, D.C.

In wake of a stock trading scandal at the Federal Reserve, Sen. Elizabeth Warren (D-Massachusetts) has called for an investigation into the agency’s officials to probe whether or not they were involved in insider trading.

Warren called on the Securities and Exchange Commission (SEC) to look into reports that the Fed’s Vice Chair Richard Clarida moved between $1 million and $5 million in stocks on February 27, 2020, the day before Fed Chair Jerome Powell made a statement about potential policy change in response to the pandemic. Though the Fed is launching an internal review of Clarida’s actions, Warren said that the SEC should also be involved.

“The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for the public trust,” Warren said in a scathing letter to the head of the SEC. “They also reflect atrocious judgement by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”

She went on to say that the SEC, which regulates the stock market and securities industry, should have a special interest in the trade. “Most importantly from the perspective of the SEC, if these trades were based on Fed officials’ knowledge of non-public, market moving information, they may have represented potentially illegal activity,” Warren wrote.

The lawmaker asked SEC Chair Gary Gensler to investigate stock trading by all top Fed officials — not just Clarida — in order to discern whether insider trading took place.

“It is not clear why Chair Powell did not stop these activities, which corrode the trust and effectiveness of the Fed,” she wrote.

The past few months, Warren has advocated for a ban on officials trading stocks, a move she believes will combat corruption. Last month, she called on local Fed leaders to ban their staff from trading stocks — and earlier this year, she unveiled legislation that would ban federal officials and lawmakers, including members of Congress, from trading stocks altogether.

“It is a no-brainer,” she said at the time, adding that barring stock trades would help increase public confidence in federal institutions.

To Warren, the scandal is further evidence of the need for major changes in leadership at the Fed. On Tuesday, the Massachusetts lawmaker delivered a speech on the Senate floor criticizing the “culture of corruption” among Fed officials.

“The responsibility to safeguard the integrity of the Federal Reserve rests squarely with [Powell],” Warren said. “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and to protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet. And once there is a problem, a quick and aggressive response is critical. Chair Powell has failed at both tasks.”

Though Powell is up for potential renomination by the Biden administration, Warren is one of his staunchest opponents in Congress and has been campaigning against his renomination. On Tuesday, she described him as a “go along to get along leader who doesn’t know or doesn’t care when, on his watch, people with great responsibility advance their own interests over the interests of our nation,” adding that he has amassed “failures” as a leader.

Warren and progressives like Rep. Alexandria Ocasio-Cortez (D-New York) have pointed out Powell’s previous regulation failures in the past. The Trump-era appointee has been weak on climate and has watered down post-recession bank regulation policies, they said, which poses risks to the financial stability of the country’s working class.

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