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Amid an outcry about Federal Reserve officials owning and trading individual securities, an in-depth look by CNBC at officials’ financial disclosures found three who last year held assets of the same type the Fed itself was buying.

  • Eric Rosengren, the Boston Fed president, held real estate investment trusts which owned mortgage-backed securities worth between $151,000 to $800,000. The Fed purchased nearly $700B in MBS, and he executed as many as 37 transactions in each of the REITS.
  • Jerome Powell was the Fed Chair and held approximately $1.25million to $2.5million of municipal bonds. These were in family trusts, over which he has no control. These were only a fraction of his reported total assets. They were not purchased before 2019. However, they were kept while the Fed bought $21.3billion in munis. This included one that he purchased in Illinois from his trust. One bond from Illinois was among the few that the Fed purchased last year.
  • Thomas Barkin, Richmond Fed president, had $1.35 to $3,000,000 in corporate bonds bought before 2020. The bonds included those of Eli Lilly and Home Depot. Last year, the Fed opened a corporate bond purchasing facility that purchased $46.5 billion worth of corporate bonds.

All of these transactions and holdings did not seem to break the Fed code of conduct. These transactions raise concerns about Fed’s conflicts of interest policies, and central bank oversight.

One of those questions is: Could the Fed have prohibited officials from buying, selling or holding the assets that the Fed was purchasing last year as it expanded the range of assets it purchased to combat the pandemic?

According to the Fed’s code of conduct, officials should avoid dealings that could give the appearance of conflict with their own interests and those of the system.

CNBC was told by a Fed spokesperson that Powell did not have any control over individual Fed municipal bond purchases or the investment in family trusts. An ethics officer at Fed determined that these holdings didn’t violate any government laws.

Barkin refused to comment.

Rosengren stated that he would stop trading and sell all of his individual positions while he was president. Robert Kaplan from Dallas Fed was active trader of millions of dollars in stocks. He also announced that he wouldn’t continue trading and would be selling his individual positions. He said that his trade was not in violation of Fed ethics rules.

CNBC spoke with a Rosengren spokesperson who said that Rosengren had “made sure” his investment and personal saving transactions were compliant with Fed ethics rules.

Dennis Kelleher (CEO of Better Markets), said that even if these Fed actions were not in violation of rules, they need to be changed.

Kelleher stated that thinking that trading like this is allowed because the Fed has current policies allows it only shows that Fed policies are seriously flawed.

Although Rosengren and Kaplan traded during the “black-out” period when Fed officials cannot talk about trade or monetary policy, Kelleher stated that during crises like last year, “the entire year should be considered blackout.” This is because Fed officials constantly discuss and craft policy to respond to rapidly changing events.

In response to CNBC questions asked in the process of our research, a Fed spokesperson released a statement Thursday saying Powell ordered a review last week of the Fed’s ethics rules surrounding “permissible financial holdings and activities by senior Fed officials.”

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