Sen. Warren notes ‘Perceived Gaps’ in Fed Chair Powell’s Insider Trading Investigation.

Sen. Elizabeth Warren Blames Federal Reserve Inspector General for Lack of Oversight

Background

During a Senate Banking Subcommittee on Economic Policy hearing, Sen. Elizabeth Warren (D-Mass.) questioned Federal Reserve Inspector General Mark Bialek about suspicious trades involving Federal Reserve Chair Jerome Powell and former Vice Chair Richard Clarida that occurred a few years back. Warren pointed out that Powell and Clarida’s actions were not in compliance with Fed rules but there has been no corrective or disciplinary action. In July 2022, the IG cleared Powell and Clarida, insisting the duo did not make any improper trades while at their posts.

Warren’s Criticism

Warren blamed Bialek for a lack of “competent oversight” during the hearing. She reminded Bialek that it has been a year and a half since these matters were being investigated. “This is not strong oversight. In fact, it is not even competent oversight.”

“It looks like, to anyone in the public, that you gave your boss a free pass,” Warren said. “And that’s just not gonna cut it here. And even today, a year and a half later, the Fed continues to stonewall Congress, stonewall the public on the underlying information about these trades. This is not acceptable. And this is why we are pushing for an independent IG.”

Investigation Findings

Warren talked about the four-page report Bialek released last year regarding his investigation of key Fed board members. The investigation found that Clarida failed to report several trades in 2019 and 2020. It also identified trades involving Powell’s family trust that were made during a blackout period for the Federal Open Market Committee, the Fed’s monetary policy-making body. These were “trades that should not have been made at those times under the Fed’s rules,” she said.

“So, the rules say ‘no trading during the blackout period,’ But Powell’s trust did exactly that. The rules say Fed Governors must disclose all trades in a timely fashion. Mr. Clarida clearly did not. And yet your investigation, I’m going to quote you here, ‘did not find evidence’ that your boss Chair Powell and Mr. Clarida ‘violated the Fed’s rules.’ That finding just makes no sense to me.”

The actions of Powell and Clarida were “unambiguously inconsistent with the Fed’s rules,” Warren said, quoting Bialek’s investigation. Yet “you recommended no disciplinary action, no corrective action.”

Conclusion

In conclusion, Warren criticized Bialek for a lack of competent oversight and called for an independent IG. The investigation found that Powell and Clarida’s actions were not in compliance with Fed rules, yet no disciplinary or corrective action was taken.