Late Sep last year, the Federal Open Market Committee (FOMC) which operates within the Federal Reserve System released a draft to prohibit Fed officials from trading and owning stocks and bonds. A recent update to the draft will include cryptocurrencies too.
The Fed officials are responsible for making decisions without bias about the financial markets, but taking part in activities like trading or investing could affect their policymaking decisions last Sep. CNBC reported in Sep 2021 that some of the top Fed officials — including the Fed chairman, Jerome Powell — traded bonds and stocks.
“I think it’s embarrassing for the Fed. It had such a squeaky-clean reputation,” Greg Valliere, chief U.S. policy strategist at AGF Investments, told CNBC about the Fed official’s trading debate. “But I don’t think it’s going to change policy in any regard at all. I think it will be rearview mirror pretty soon, assuming there’s no other shoe to drop.”
Anthony “Pomp” Pompliano tweeted about the Fed banning its official from trading certain assets. “You can’t have an unbiased, independent central bank if the employees are speculating in markets,” he said.
According to the FOMC statement, the regulations to prevent Fed officials from trading crypto, stocks and bonds were previewed in Oct last year. Although some of the new rules are already in place, the majority will be officially applied as of May 1.
“When the new policy takes effect, Reserve Bank presidents will be required to publicly disclose securities transactions within 30 days, as Board members and senior Board staff currently do,” according to the statement. Furthermore, all top Fed officials will be required to hold their assets for at least one year to report 45 days prior to making any purchase or sale within the mentioned markets as of July 1.
The new set of rules will apply to officials, including:
Board members, Reserve Bank presidents, “Reserve Bank first vice presidents, Reserve Bank research directors, FOMC staff officers, the manager and deputy manager of the System Open Market Account, Board division directors who regularly attend Committee meetings, any other individual designated by the Chair, and to the spouses and minor children of these individuals.”
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