Fed denies release of correspondence on pandemic trades made by policymakers

Feb 9 (Reuters) – The U.S. Federal Reserve, responding to a Freedom of Information Act request from Reuters, said there were about 60 pages of correspondence between its ethics officers and policymakers regarding financial transactions carried out during the pandemic year 2020.

But he “refused in their entirety” to release the documents, citing exemptions under the Information Act which he said applied in the case.

Disclosure of exchanges by two regional reserve bank presidents during the pandemic led them to resign last fall and prompted Fed Chairman Jerome Powell to revise Fed ethics rules and ask the central bank’s inspector general to investigate.

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FOIA responses to Reuters for the first time quantify the back and forth that may have occurred on decision makers’ personal trades in a year when markets first crater and then rebound on the base at the both a massive federal fiscal stimulus and an aggressive bailout effort by the Fed. .

Reuters has requested release under the Public Information Act of any 2020 communications “regarding the propriety of individual financial transactions” between the Fed’s general counsel or ethics staff and board members. governors, then the president of the Dallas Fed, Robert Kaplan, or the president of the Boston Fed, Eric Rosengren.

Margaret McCloskey Shanks, the Fed’s head of FOIA and deputy board secretary, told Reuters that staff had identified “about 47 pages of information” involving Fed board members and about 13 pages involving Kaplan or Rosengren. However, publication of the documents was refused.

“Responsive documents contain pre-sentence and deliberative information, as well as information subject to solicitor-client privilege,” she wrote. There was, she said, nothing in the documents that was “reasonably severable” and not exempt from publication under the FOIA.

Demands for more disclosure from the Fed on the ethical controversy have been widespread, with public interest groups and elected officials, including Senator Elizabeth Warren, Democrat of Massachusetts, calling on the central bank to release more details on the stock transactions of policy makers and the advice or advice provided to them by ethics officers.

Gunita Singh, an attorney for the Journalists Committee for Press Freedom, said the FOIA exemption cited by the Fed is intended to “protect the agency’s candor” so US government staff and officials can discuss freely. issues as decisions are made.

Shanks’ response did not specify what ongoing discussions or deliberations warranted withholding the information.

The inspectors general’s investigation into Fed trading during the pandemic is still ongoing. The Fed is also still finalizing the procedures and rules for new ethics regulations adopted due to the controversy.

The Fed released the substance of an email sent by its ethics office to policymakers at the height of the crisis. In late October, after a New York Times report, the Fed released a March 23, 2020 email from its ethics officer that noted that Fed rules were intended to avoid even the appearance that officials were using their access to market information for personal purposes.

Policymakers were urged to “consider observing a trade blackout and avoid making unnecessary securities transactions for at least the next few months,” or until meetings and decisions of the Fed back to normal after state of emergency this spring.

The ethics scandal blindsided the Fed last fall after stories appeared in the Wall Street Journal and Bloomberg about Kaplan’s active stock trading during the pandemic and Rosengren’s investment in real estate securities.

This activity has been noted in the annual financial disclosure reports that Fed policymakers are required to file. The two officials initially responded that their trades complied with Fed ethics rules, but said they planned to divest nonetheless. They eventually quit.

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Editing by Edward Tobin

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