Eric Rosengren, President and CEO of the Federal Reserve Bank of Boston. PHOTO: Bloomberg by Paul Yeung.
Colby Smith in Washington
Two senior Federal Reserve officials who prompted the US central bank to launch a review of its ethics rules indicated on Monday that they will resign from their posts.
Robert Kaplan, chairman of the Dallas branch of the Federal Reserve, announced his intention to step down a few hours after Eric Rosengren in Boston indicated that he would end his term of more than three decades working in that branch early and leave his position on September 30 due to health problems.
Kaplan, who has been in charge of the Texas-based Fed branch for six years, cited recent scrutiny of his investments in financial markets that was revealed earlier this month.
“The Federal Reserve is reaching a critical point in our economic recovery as it assesses the future trajectory of monetary policy. Unfortunately, the recent focus on my financial situation could be a distraction from the execution of that vital work, “he said in a statement. “For this reason, I have decided to step down from my position as president and CEO of the Federal Reserve Bank of Dallas.”
The announcement comes during a turbulent period for Fed chairmen, following reports that they had been active investors as the US central bank was aggressively supporting financial markets to lessen damage from the pandemic last year. .
Rosengren planned to retire in June 2022, upon reaching the mandatory retirement age for his position. Rosengren on Monday indicated that his kidney condition was worsening, for which he qualified for a transplant in June of last year.
“It has been an honor to work in the Federal Reserve system, in a job where one can constantly be looking for the economic and financial well-being of the country and New England,” he said Monday. “I am confident that my colleagues will continue to build on our accomplishments, and will continue to promote improvements for the public we serve.”
Kaplan revealed it held positions of more than $ 1 million in 27 publicly traded companies, funds, and alternative investments, while Rosengren broke down a list of positions of at least $ 151,000 in four real estate investment companies.
Both Fed chairmen agreed to sell the shares of their portfolios by the end of September and keep their assets in cash or in passive funds – something that Rosengren at the time described as a way to “avoid even the slightest appearance of a conflict of interest. ”.
Federal Reserve CEO Jay Powell has ordered a broad reassessment of the Fed’s ethical framework and stated that the central bank would seek to strengthen its regulations regarding the investment activities of its senior officials.
In a statement Monday, Powell commented on Rosengren’s track record that “Eric has repeatedly distinguished himself for more than three decades as an accomplished public servant within the Federal Reserve system…. In addition to his knowledge of monetary policy, Eric contributed a relentless focus on the pursuit of financial system stability. My colleagues and I will miss him ”.
Powell also thanked Kaplan for his work at the Fed, distinguishing him as a “worthy companion.”
Rosengren’s position was taken over on an interim basis by Kenneth Montgomery, First Vice President and Chief Operating Officer of the Boston branch. Preparations for appointing the next presidents are “proceeding rapidly,” according to the bank. Kaplan, who will step down Oct. 8, will be temporarily replaced by Meredith Black, first vice president of the Dallas branch.
The next chairman in the Boston Fed will have a vote on the Federal Open Market Committee during 2022. The chairman of the Fed in Dallas will not have the right to vote until 2023.
According to new individual projections released by the central bank last week, Fed officials are evenly split on the chances of an increase in US interest rates starting next year; and at least three increases are currently anticipated by the end of 2023.
Before imposing tighter monetary policy, the Fed will need to reduce its $ 120 billion a month asset purchase program, which has been active since last year and was expected to continue until the central bank saw “substantial additional progress” in achieve average inflation of 2 percent along with a level of full employment.
A majority of experts now expect the Fed to announce at its next policy meeting in November that it will begin to slow down such bond purchases.
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