Richard Clarida, the vice-chair of the federal reserve, has decided to step down. This is the third resignation after the resignation of two presidents of fed regional banks, the Fed officials cited conflict of interest due to their questionable trading activities during the (2020) recent trading scandal that has shaken the fed. In an announcement released Monday afternoon, Clarida said he will be stepping down from his post this Friday. His term expires on Jan. 31.
The federal reserve, the central bank of the USA, is always keenly observed and followed by the central banks around the world, due to the fact that the USA is a global leader. Its policies lead to dynamo effects around the world due to increased globalization that has developed deep interconnectedness among the nations around the world. Hence this trading scandal stock by the Fed would hurt its credibility.
The common factor that led to the conflict of interest in the above three cases was, officials traded in stocks in February 2020, when the Fed was undertaking extraordinary rescue measures to support the economy during the coronavirus crisis. The officials traded in stocks- buying and selling, which could have led to significant monetary gains. Even though the Ethics code was followed. But it undermined the Fed’s commitment to supporting the market, as and when the economy was suffering from crisis, its regional presidents and vice-president were trading in favorable stocks just before the measures were announced.
According to the recent reports, the latest resignation of the high official came this delay as the official amended his disclosures regarding his trade recently. Earlier it was just reported that the stocks were bought by the Vice-president, just a day before the chairman’s announcement of the Fed taking measures to support the economy, but the latest amendment reveals that a proper trade took place, that is stocks were bought and sold before the chairman’s address of Fed backing the Economy and the market.
This incident has led to severe criticism of the Fed officials, regarding holding stocks, as they are directly connected with the market and the economy and the federal bank’s policy has a very significant effect on the market and could even change the ways and returns in the market and it’s not rational to keep such an influential factor in the trade with markets.
Hence, the chairman has unveiled a new code of ethics, for the federal board members and other top officials, to discourage the repeat of the above activities the new laws bar the Fed officials from owning individual stocks and a requirement of 45 days has been set for any trade by the officials.
