The Federal Reserve System is remarkably complex. It’s designed, in its own words, with “a blend of private and governmental characteristics.” It has 12 regional banks, many with multiple branches, where the majority of directors are elected by member banks in the district. Then there’s the Fed’s board of governors in Washington, whose members are selected by the president, approved by the Senate and are permanent voters on the policy-setting Federal Open Market Committee.
This is no excuse for questionable trading among the central bank’s most senior leaders. Two regional bank presidents decided to step down after their 2020 financial disclosures revealed that they bought and sold financial assets that were sensitive to monetary policy. Boston Fed President Eric Rosengren retired early last week, citing health reasons, and Dallas Fed President Robert Kaplan will depart Friday. Meanwhile, Vice Chair Richard Clarida is taking heat for shifting from bonds to stocks mere days before the start of sweeping central bank actions to combat the Covid-19 pandemic. Collectively, it’s a terrible look.