ASX to drop, S&P 500 slips, iron ore tumbles

The Federal Reserve’s Inspector General said chairman Jerome Powell and former vice chairman Richard Clarida’s trading activity had not broken any laws or rules, but the probe into the former heads of the Dallas and Boston regional Fed banks remained open.

“We did not find evidence to substantiate the allegations that former vice chairman Clarida or you violated laws, rules, regulations, or policies related to trading activities as investigated by our office,” Inspector General Mark Bialek said in a letter to Powell dated July 11 and published on Thursday (Friday AEST). “The investigation of senior Reserve Bank officials is ongoing.”

The Fed imposed sweeping restrictions this year on officials’ investing and trading following an embarrassing ethics scandal, which prompted allegations of corruption and demands from US lawmakers for change.

The IG said a financial advisor to a Powell family trust made five trades during a Fed blackout period — following a request by Powell’s wife to make funds available for charitable donations during December — and the trust advisor “subsequently acknowledged that executing the trades during the blackout period was an ‘oversight’ on the team’s part”.

“We found no evidence that you or your spouse had contemporaneous knowledge that the five transactions were executed during the blackout period,” Bialek said. “As such, we found that you did not violate the FOMC trading blackout rule,” he added, referring to the policy-setting Federal Open Market Committee.

The IG also said that Clarida failed to report several trades in his 2019 and 2020 financial disclosures. Clarida told the IG that in responding to its inquiries, he discovered that he had inadvertently omitted one trade from his 2019 disclosure form and three trades from his 2020 form.

Clarida’s 2020 disclosures showed he sold at least $US1 million of shares in a US stock fund in February 2020 before buying a similar amount of the same fund a few days later, on the eve of a major Fed announcement that signalled its readiness to buffer the economy from the coronavirus. Clarida stepped down January 14 ahead of the expiration of his term as a governor on January 31.

A spokesman for Clarida said the move was pre-planned.