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Atlanta Federal Reserve Bank President Raphael Bostic Defends Undisclosed Trades, Says Advisors Put Trades In


Atlanta Federal Reserve Bank President Raphael Bostic acknowledged on Friday that he had inadvertently made investments during periods when it was forbidden, violating Fed ethics codes by improperly disclosing financial transactions over his five years leading the bank.

Bostic said the trades had been made by financial advisors. He had put his financial holdings into accounts managed by a third party that neither he nor his personal investment adviser had the ability to direct, Wall Street Journal reported.

“I was unaware of any specific trades or their timing,” Bostic wrote in a seven-page letter that accompanied revised financial disclosure forms going back to 2017.

He did this, he said, to avoid conflicts of interest. He thought “having funds in managed accounts…would distance and protect me from decisions associated with the management of my financial assets.”

Amended disclosures filed Friday, Oct. 14, showed that dozens of Bostic’s sales or purchases of mutual funds and other investment vehicles hadn’t previously been disclosed. More than 150 of those transactions had settled on dates that weren’t allowed because of restrictions related to sales or purchases before and after Fed policy meetings.

In 2021, Bostic held more than $50,000 in Treasury securities, exceeding the allowable limit for Fed officials.

Bostic blamed the violations on his flawed interpretation of central bank policies. “As soon as I became aware that my financial reporting did not meet the expressed or implicit expectations necessary to maintain the public’s trust,” he said he sought to correct his filings and overhaul how he manages his personal accounts.

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“At no time did I knowingly authorize or complete a financial transaction based on nonpublic information or with any intent to conceal or sidestep my obligations of transparent and accountable reporting,” he added.

Two of the 12 regional Federal Reserve Bank presidents resigned in 2021 after financial disclosures showed they had traded extensively in individual stocks in 2020 when the Fed was implementing sweeping policies and market interventions related to the coronavirus pandemic.

Critics said that Fed policies helped elevate stock prices and benefited richer Americans, including the Fed presidents.

Eric Rosengren, president of the Boston Federal Reserve, gave notice in September and Robert Kaplan, president of the Dallas Federal Reserve Bank, quit in October to eliminate any “distraction” to the central bank related to his personal investment activities.

Both men traded in securities while deciding U.S. monetary policy. The customary ethical standard by Fed officials is to buy and hold diversified mutual funds, wrote Pam Martens and Russ Martens, who operate the financial news website Wall Street On Parade.

Rosengren disclosed stakes in four real estate investment trusts with multiple sales and purchases in those and other securities. The investments raised questions because Rosengren had warned the public about the risks in commerical real estate. He also advocated for the Fed to scale back its purchases of mortgage-backed securities to avoid overheating the housing market, Bloomberg reported.

The Fed said Chairman Jerome Powell had asked their inspector general to conduct an independent review, Wall Street Journal reported.

Earlier this year, the Fed imposed stricter codes limiting what Fed officials and senior staff can invest in, required pre-approval of trades and extended the new ethics restrictions to family members of central bank leaders and senior staff.

In a statement Friday, Bostic said that as soon as he realized his financial activities were in violation, he brought it to the attention of the Atlanta Fed’s board of directors and top lawyer, and the U.S. central bank.

Elizabeth Smith, the chairwoman of the Atlanta Fed board, said the board had accepted Bostic’s explanation and that the directors were confident he hadn’t sought to profit from any private policy-setting deliberations.

“We are satisfied with his revised financial disclosures and the changes he has made in managing his investments,” Smith said in a statement Friday, according to the Wall Street Journal. “The board is also satisfied that President Bostic has established procedures to ensure that future violations do not occur.”

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