WASHINGTON, Sept 27 (Reuters) – Two Federal Reserve officials who came under scrutiny for investment trades they made last year announced their retirements on Monday, in a controversy that has already sparked a planned review of the Fed’s ethics rules.
Dallas Fed President Robert Kaplan said he will retire on Oct. 8, citing the “distraction” of the controversy over his investments, while Boston Fed President Eric Rosengren said he will retire on Sept. 30, pointing to a long-term health condition.
The two are among 12 regional Fed presidents that get rotating seats on the central bank’s powerful monetary policy committee, which sets U.S. interest rates.
Kaplan and Rosengren had faced calls to step down for investment trades made in 2020, a year in which the Fed took unprecedented action to steady the economy, while news of the transactions, revealed in recent financial disclosures, raised questions about the effectiveness of Fed trading guidelines for policymakers.
Their departure came after Fed Chair Jerome Powell, who is nearing the end of his term and under consideration for reappointment as Fed chief, called earlier this month for a review of the central bank’s ethics rules and said the policies need to change.
Powell is due to testify before the Senate Banking committee on Tuesday, where he may face questions from Democratic Senator Elizabeth Warren, who has demanded stricter ethics rules at the regional Fed banks.
According to financial disclosures first reported by the Wall Street Journal, Kaplan made multiple million dollar trades in individual stocks in 2020. Rosengren invested in real estate investment trusts on a smaller scale, but he was criticized for making the moves while also calling out risks in the real estate sector.
The financial disclosures did not look strikingly different from prior years, and both officials said their investment trades were cleared by ethics officers and did not violate Fed policy. They also previously agreed to sell their stock holdings by the end of September to avoid even the appearance of a conflict of interest.
But the actions were still viewed as problematic during a year when millions of Americans lost their jobs and the Fed took sweeping action to stabilize financial markets and the economy in the wake of the rapidly-unfolding pandemic. read more
When asked if he trusted the two regional Fed bank presidents to do their jobs, Powell said last week that “in terms of having confidence and that sort of thing, I think, no one is happy.”
Calls for broader reform of Fed ethics rules continued Monday despite the resignations, with outside groups pressing Powell to take stronger action. read more
‘DISTRACTION’
Kaplan said on Monday afternoon: “Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work.”
Rosengren earlier cited a long-term health condition in his decision to step down.
In a statement that did not mention the investment controversy, Rosengren revealed that he qualified for the kidney transplant list in June of 2020 and wanted to make “lifestyle changes” to protect his health.
While Rosengren was facing mandatory retirement next June, Fed rules would have allowed Kaplan to stay on until 2025.
The last such high-profile departure from the Fed was in 2017, when then-Richmond Fed president Jeffrey Lacker resigned while acknowledging he had, five years earlier, been the source of information used in a report by Medley Advisors that included at that point unreleased information.
Lacker took explicit blame, saying his “conduct was inconsistent with … confidentiality policies.” Neither Rosengren or Kaplan have acknowledged any breach of the Fed ethics rules that require them to abide by certain trading practices and avoid even the appearance of a conflict of interest.
NEW LEADERSHIP
Kaplan, 64, was hired to lead the Dallas Fed just over six year ago. The son of a traveling jewelry salesman, Kaplan had taught at Harvard Business School for about 10 years and before that was an executive at Goldman Sachs, where he worked for 23 years.
Rosengren, a PhD economist, has been the president of the Boston Fed since 2007, and has been part of its staff since 1985. Prior to becoming president he was head of the bank’s supervision and regulation division.
Dallas Fed First Vice President Meredith Black will serve as interim president after Kaplan steps down.
Boston Fed First Vice President Kenneth C. Montgomery will take over as interim president during the search for Rosengren’s replacement, which is already underway given his approaching retirement date.
The back-to-back resignations leave a suddenly wider opening for a potential overhaul of Fed leadership.
U.S. President Joe Biden is assessing whether to reappoint Powell and is poised to nominate as many as three others to the seven-member Washington-based Board of Governors, a group long criticized for mostly being comprised of white men.
The departure of the two Fed bank presidents could allow for a more diverse group of regional bank presidents, who are chosen by local boards of directors with the approval of the Fed governors. Currently seven of 12 bank presidents are white men, three are white women, and two are non-white men.
Reporting by Howard Schneider, Ann Saphir, Jonnelle Marte and Lindsay Dunsmuir;
Editing by Raissa Kasolowsky, Andrea Ricci, Aurora Ellis and Richard Pullin
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
