Richard Clarida, the second highest official at the Federal Reserve, will resign early after new details of his trading activity early in the pandemic were revealed.
- His term as vice-chair was to end January 31; he will instead step down January 14.
Why it matters: Questionable trading activity by a handful of top officials undermined the central bank's reputation for ethical behavior.
Catch up quick: In late February 2020, with the markets going haywire as coronovirus arrived in the U.S. — and the Fed beginning its efforts to prop up markets and the economy — Clarida bought stocks.
- When the trades were revealed in 2021, the Fed initially explained them as part of routine portfolio rebalancing.
- As the New York Times first reported last week, he had also sold the same fund a few days earlier as markets were falling, suggesting the trades were more tactical.
Flashback: Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren stepped down from their jobs last year after the revelation of their own trading during the same period.
What's next: Fed Chair Jerome Powell faces a Senate confirmation hearing Tuesday for a second term leading the central bank, and could face tough questioning about ethics at the Fed.
The bottom line: Central bankers' credibility depends on public confidence they are acting in the best interest of the economy, not their own portfolios. Trading behavior in 2020 put that credibility at risk for the Fed....