Richard Clarida, the Vice-Chair of the Federal Reserve, traded money from a bond fund to a stock fund only one day before Fed Chairman Jerome Powell made a statement on the pandemic that made stocks in certain areas more valuable than the bond market.
The statement outlined steps that the Federal Reserve could take in case things got worse.
Clarida transferred between one and five million from the bond account to the stock account, thanks to his insider information.
Federal Reserve Vice Chair Richard Clarida traded between $1 million and $5 million out of a bond fund into stock funds one day before Chair Jerome Powell issued a statement flagging possible policy action as the pandemic worsened, his 2020 financial disclosures show.
Clarida’s trades, described in forms filed with the government ethics office, show the shifting of the funds out of a Pimco bond fund on Feb. 27, 2020, and on the same day buying the Pimco StocksPlus Fund and the iShares MSCI USA Min Vol Factor exchange-traded fund in similar dollar ranges. For the year, he listed five transactions.
The following day on Feb. 28, a Friday, at 2:30 p.m., Powell took the unusual step of releasing a statement saying the virus poses “evolving risks to economic activity.” In the same statement, Powell said the Fed was “closely monitoring developments and their implications for the economic outlook.”
Two weeks ago Chairman Powell asked for an investigation of Federal Reserve employees who violated ethics rules and were using insider information to make money.
This is when they discovered the trades made by Clarida. But, when Powell asked for the investigation, he did so because of Fed employees in Dallas and Boston last year.
A Fed spokesman said:
“This review will assist in identifying ways to further tighten those rules and standards. The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”
So, what exactly is he saying? Did these people utilize loopholes to make money from the forthcoming Federal Reserve statements? It sounds like it to me.
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No wonder that holding a Federal Reserve job has been so attractive.
Will resignations follow after new rules are put in place to stop employees from using insider information to make money?