Elizabeth Warren Calls for an Insider Trading Inquiry at the Fed

Mr. Powell announced on Feb. 28, 2020, that the Fed was closely watching the fallout from the coronavirus pandemic — the first step in a wide-ranging central bank rescue that would ultimately push up stock prices.

Ms. Warren blasted Mr. Clarida’s 2020 move as inappropriate.

“There is no justifiable ethics or financial rationale for him or any other government official to be involved in these questionable market machinations while having access to nonpublic information and authority over decisions that have extraordinary impacts on markets and the economy,” Ms. Warren wrote in her letter.

The trading activity that happened among Fed officials in 2020 was not historically abnormal. Mr. Kaplan traded stocks throughout his tenure. A former Fed vice chair, Stanley Fischer, bought and sold individual stocks, his disclosures for 2016 showed, and Fed governors often rebalance their broad-based portfolios.

But the fact that the transactions happened during a year in which the Fed was so crucial to assets of all varieties has stoked calls for new ethics rules at the central bank. The Fed intervened in the municipal and corporate debt markets for the first time last year, expanding into areas that may not have been considered under the central bank’s existing restrictions.

Mr. Powell has ordered a review and overhaul of the central bank’s guidelines and practices, which the Fed has said are in line with those recommended to government officials broadly and in some cases stricter. Ethics officials have said that given the special and increasingly expansive role the central bank plays in markets, it is probably necessary for it to adopt stricter limitations.

The recent uproar over Mr. Clarida’s trades in even broad, boring funds — and demands to know what he knew when he made the decision to rebalance toward stocks — underline why the ethics practices most likely need to change, said Norman Eisen, a senior fellow at the Brookings Institution and an ethics adviser in President Barack Obama’s White House.

“Because of the extraordinary influence of senior officials at the Fed on bond and equity markets, those questions are legitimate,” Mr. Eisen said. “It does point, again, to the need for special Fed rules.”

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