(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

 

WASHINGTON - The Federal Reserve's next chair will be the old one again. U.S. senators asked Jerome Powell about Vice Chair Richard Clarida's investment moves as the pandemic hit in 2020 during Tuesday's hearing on Powell's nomination for a second term. But they didn't make a big deal of it.

Clarida’s resignation on Monday put renewed focus on Fed officials' personal investments. Powell's No. 2 will step down on Friday, about two weeks early. Top Fed folks have to disclose financial trades, but Clarida recently amended records of his transactions in the days before Powell said the central bank would support the economy back in February 2020.

Trades in the millions of dollars at such a sensitive time risk undermining the Fed’s integrity, and other officials have also been caught up. Last September, the presidents of the regional Federal Reserve Banks in Dallas and Boston said they would retire after disclosures that they traded individual stocks and real estate securities in 2020.

Senate Banking Chair Sherrod Brown said on Tuesday that it was up to the Fed boss to restore trust in the central bank. Fellow Democrat Jon Ossoff, who will be introducing a plan to bar lawmakers from making individual stock trades, said it’s important that people in positions of power don’t take advantage of inside knowledge.

Powell noted that he has come up with tougher rules. Last October, the Fed said policymakers would have to obtain prior approval for trades and that such investment moves would be barred during times of market stress.

Perhaps recognizing that their own rules for now remain lax, most senators' questions focused on inflation and other economic issues. Pat Toomey, the top Republican on the committee, criticized the central bank’s continued support of the recovering economy, though the Fed recently began reducing its bond-buying program.

Lael Brainard, who has been nominated to replace Clarida and – unlike Powell – is opposed by many Republicans, may not get such an easy ride when her turn comes. But senators from both sides of the aisle praised Powell’s handling of the pandemic. He looks like a shoo-in for another four years in the job.

 

 

CONTEXT NEWS

- U.S. Federal Reserve Chair Jerome Powell on Jan. 11 testified before the Senate Banking Committee for his nomination hearing for a second four-year term in the job. Committee Chair Sherrod Brown was among the lawmakers who questioned him on investment purchases and sales made by Fed Vice Chair Richard Clarida as Covid-19 cases rose in the United States in early 2020.

- Clarida said on Jan. 10 that he will resign on Jan. 14, about two weeks before his term officially ends. The move comes after the New York Times reported that he amended his financial disclosures to show he sold three investment funds that track the stock market worth up to nearly $5.8 million on Feb. 24, 2020. Three days later, he put money into two investment funds, including one he had earlier sold, worth up to a total of $10 million.

- Another day later, on Feb. 28, Powell said the central bank would use its tools to help the economy as Covid-19 cases rose in the United States. A Fed ethics official said he believed the amended disclosure was in compliance with applicable rules.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Richard Beales and Amanda Gomez) ((For previous columns by the author, Reuters customers can click on CHON/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe | gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))