Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, reported on Friday that he had failed to previously disclose financial transactions on his official central bank forms — including ones that ran afoul of Fed rules that limit trading ahead of Federal Reserve meetings.
Mr. Bostic also failed to initially disclose transactions that took place during the height of the central bank’s coronavirus response in 2020, when the Fed was intervening in markets.
Mr. Bostic was not managing the investments himself, he explained in a news release that the Atlanta Fed released on Friday. He said he “was unaware of any specific trades or their timing,” and had worked with the regional bank’s lawyers to correct the problem once he realized that his money manager had made trades that conflicted with Fed rules, according to the release.
Mr. Bostic also held too many Treasury securities to comply with the Fed’s limitations on how much government debt officials can hold, the Atlanta Fed said, but has rectified that problem.
“I want to be clear: 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,” Mr. Bostic said in the release.
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The Federal Reserve Board announced on Friday that its independent watchdog would investigate Mr. Bostic’s revised disclosures. The Atlanta Fed’s board said it accepted Mr. Bostic’s explanation of his reporting mistakes.
“After reviewing the documents and discussing these issues with President Bostic and the Atlanta Fed’s chief ethics officer, the board acknowledges the violations and accepts President Bostic’s explanation,” Elizabeth A. Smith, the Atlanta Fed board chair, said in a statement.
Mr. Bostic’s failure to correctly report activity in his portfolio underscored how lax Fed oversight of its officials’ financial habits has historically been.
The Fed’s 12 regional presidents have long filed annual disclosures, but those were previously posted online only sporadically, and policies about releasing them varied from bank to bank. Last year, after a news organization requested all of the disclosures, it became clear that the president of Federal Reserve Bank of Dallas had been trading individual stocks throughout 2020. The Federal Reserve Bank of Boston president also reported trades in real-estate-related securities that year. A few months later, it became clear that the Fed’s vice chair had sold and then rapidly repurchased stocks during a tumultuous week in markets in early 2020.
The trades drew scrutiny from lawmakers and ethics experts. The Fed heavily influences stock, real estate and interest-rate sensitive markets, and had an especially outsize role as markets gyrated at the onset of the coronavirus pandemic. While there is no clear evidence that they did, officials could have used the information they had as public policymakers to earn profits for themselves.
The Fed’s independent watchdog investigated each official’s trades, much as it will now investigate Mr. Bostic’s. It largely absolved the Fed vice chair, though the results of the other two investigations have yet to be released. Both of the Fed presidents in question — Robert Kaplan and Eric Rosengren — left their posts, and the vice chair, Richard Clarida, stepped down earlier than expected. Other explanations were given for some of those resignations. The central bank ushered in a new and much stricter set of stipulations that limit when, how and what central bankers can trade.
Mr. Bostic’s transactions did not include individual securities, but there were a number of trades in his portfolio in March and April 2020 — the period when the Fed was very active in markets.
Mr. Bostic’s retirement account bought small amounts of various index funds on March 19, 2020, while asset prices were sagging as the pandemic took hold in the United States. On March 23, the Fed announced a wide-ranging market rescue. On March 24, Mr. Bostic’s account sold out of several other funds and bought into several more.
Many of the transactions — along with others on April 8, a day before the Fed again heavily intervened in markets — took place after the Fed Board had sent a letter on March 23 to regional central bank ethics offices warning officials to avoid unnecessary trading when the central bank was so active in markets.
It is not clear whether Mr. Bostic profited from the transactions, and according to his statement, he would have lacked any knowledge that they had occurred.
But his account might have benefited from trading during a period when the Fed fundamentally shifted the tone in markets. That underlines why the Fed has come under intense pressure to be more transparent about how its officials are managing their money.
“This is an alarming failure by President Bostic and further evidence of the depth of the ethics problem at the Fed,” Senator Elizabeth Warren, Democrat of Massachusetts and a frequent Fed critic, said in a statement on Friday afternoon.
It is also a key reason that Mr. Bostic’s reporting mistakes will face additional scrutiny.
Jerome H. Powell, the Fed chair, “has asked the Office of Inspector General for the Federal Reserve Board to initiate an independent review of President Bostic’s financial disclosures,” the Fed said in its statement. “We look forward to the results of their work and will accept and take appropriate actions based on their findings.”
