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Fed vice chair is latest official to quit in trading scandal

WASHINGTON (AP) – Federal Reserve Vice Chair Richard Clarida said on Monday that he will step down on Friday, the third Fed official to resign after a trading scandal at the central bank that involved potential conflicts of interest.

The announcement followed new revelations around Clarida’s trading in a stock fund in February 2020, when the coronavirus threatened to upend the global economy and the Fed was discussing extraordinary rescue measures.

The New York Times last week reported that Clarida amended his financial disclosures in late December to show that he had sold and then repurchased shares in the stock fund within a matter of days.

Previously, Clarida had reported only the purchases, which came a day before Chair Jerome Powell said the Fed was prepared to support markets and the economy.

The Fed had characterised the purchase as a simple portfolio rebalancing – an explanation that was undercut by the revelation of the initial sale.

Last year, the presidents of two Fed regional banks – Robert Kaplan of the Dallas Fed and Eric Rosengren of the Boston Fed – also stepped down after their questionable trading was revealed.

Although the trades complied with Fed financial ethics rules, they raised the possibility of conflicts of interest because the officials could have profitted from the actions the Fed was taking at the time. Critics, notably Senator Elizabeth Warren, sharply criticised the trades and called for a ban on stock ownership by Fed officials.

Traders Edward McCarthy and Edward Curran working on the floor of the New York Stock Exchange. PHOTO: AP
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