Fed Governor's Resignation Followed Ethics Probe into Stock Trades

4 hours ago7 min read

The Federal Reserve's ethical standards have been thrust into the spotlight again following the disclosure that former Governor Adriana Kugler was the subject of an investigation for potential violations of the central bank's strict trading policies. This revelation, detailed in new financial disclosures from the U.S. Office of Government Ethics, casts her unexpected August resignation in a new light, creating a vacancy on the Fed Board of Governors for President Trump to fill.Kugler, a 2023 appointee of former President Biden, faced an ethics probe after her financial disclosures revealed trades in individual stocks like Cava and Southwest Airlines during prohibited 'blackout periods'—windows around interest rate decisions when senior Fed officials are barred from trading. Fed rules explicitly forbid officials and their immediate families from trading individual stocks and require investments to be held for at least one year to avoid the appearance of short-term speculation.A note on Kugler's disclosure form indicated some of the trades were made by her husband without her knowledge. The situation intensified just before the Fed's key policy meeting in July, when Kugler reportedly asked Chair Jerome Powell for permission to address her non-compliant holdings, a request that was denied.Kugler was notably absent from the pivotal July 30th meeting and announced her resignation two days later, strongly implying the investigation prompted her departure. Official filings reveal the Fed declined to certify Kugler's financial disclosures as compliant with its ethics rules.A note from Fed ethics official Sean Croston confirmed that 'consistent with our standard practices and policies, matters related to this disclosure were referred earlier this year' to an independent watchdog. This incident recalls the 2021 trading scandal that prompted Powell to tighten rules, aiming to eliminate any suspicion that officials could profit from their access to market-moving information.The Fed's interest rate decisions and policy guidance hold immense power to sway global markets, making personnel integrity critical. The 2021 affair, which led to the departure of two senior officials and the 2022 exit of a vice chair under similar circumstances, highlights an ongoing vulnerability.The political consequences are immediate; the Trump administration quickly nominated White House economist Stephen Miran to fill Kugler's seat. Miran has already dissented twice in favor of more aggressive rate cuts, aligning with White House pressure for lower borrowing costs.These revelations emerge at a sensitive time for the Fed, which faces intense White House scrutiny over its monetary policy. The institution is undergoing rapid change, with Trump expected to name a new Fed chair by year's end to replace Powell when his term expires in May.This coincides with the legal battle over the attempted firing of Governor Lisa Cook and upcoming reappointment decisions for 12 regional Fed presidents in February. In a related development, Atlanta Fed President Raphael Bostic, who faced an internal review over his own financial disclosures in 2022, has announced his retirement ahead of the reappointment process, signaling a potential broader reshaping of the nation's top economic institution as it struggles to uphold its ethical standards.

#Federal Reserve

#ethics probe

#stock trades

#resignation

#Jerome Powell

#Trump administration

#featured

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