James Bullard, president of the Federal Reserve Bank of St. Louis, came under fire Thursday after The New York Times revealed that he “spoke last Friday at an off-the-record, invitation-only forum held by Citigroup, and open to clients.”
“Fed officials are making a mockery of ethics—and Chair Powell is failing to overhaul a culture of corruption.”
As Times reporter Jeanna Smialek summarized in a series of tweets about her reporting: “Against Fed rules? Unclear, though we go through them in the story. Bad look? Definitely, a range of people said.”
“I wanted to get a sense of whether this kind of private off-record event with bank clients happens a lot and I just don’t hear about it, so I called around,” Smialek explained. “The overwhelming answer: No.”
Narayana Kocherlakota, a former president of the Federal Reserve Bank of Minneapolis, told her that “this is not normal” and with Citi’s clients involved, “the optics are terrible.”
Brookings Institution senior fellow Norm Eisen similarly said that at first glance, “it’s not an ethics violation, but it’s not a great look.”
This is more than just a "bad look". It's a big problem. How is the public supposed to take seriously the idea that the Fed – a private/public institution that walks & talks like a private bank – is focused on their interests when it's holding private briefings for the big banks? https://t.co/MVbIZTwElI
— Fed Up Campaign (@Fed_Up_Campaign) October 20, 2022
The report explains that while the Fed’s rules don’t bar Bullard from attending such events, comments shared behind closed doors should align with previous public statements, and central bankers should “not provide any profit-making person or organization with a prestige advantage over its competitors.”
Jeff Hauser of the watchdog group the Revolving Door Project told Smialek that “Citi is flexing here,” showing clients that it can provide “privileged access” to people like Bullard.
“There are few better sources of information on the planet than a member of the Federal Open Market Committee,” he said. “Their every utterance is treated as potentially market moving.”
In a tweet about the reporting, Hauser took aim at Fed Chair Jerome Powell, saying, “That ongoing indications of ethical lapses continue apace underscores [the project’s] view that Powell cannot reform the Federal Reserve.”
If you’re keeping score at home – in the last week we’ve had one Fed Governor admit he broke the trading rules because “he didn’t understand them” and another speak at a bank’s private client event.
— Sean Tuffy (@SMTuffy) October 20, 2022
U.S. Sen. Elizabeth Warren (D-Mass.)—who chairs the Senate Committee on Banking, Housing, and Urban Affairs’ economic policy panel and has been a high-profile critic of the Fed’s recent interest rate hikes—also called out Powell on Thursday and highlighted that the Bullard revelation follows a recent scandal involving another central banker.
“In the midst of a stock trading scandal, now we learn that Bullard was secretly spilling his views on the economy to [Citi] and their clients,” Warren said. “Fed officials are making a mockery of ethics—and Chair Powell is failing to overhaul a culture of corruption.”
According to Smialek:
The Federal Reserve Bank of St. Louis called the discussion informal and said Mr. Bullard had participated in the event in the past. It also noted that he had given an interview to Reuters earlier in the day with remarks similar to those he made at the Citi event, and appeared at other forums in Washington on Friday and Saturday. As a result, they said, the public had access to his views.
But a person who attended the speech, who spoke on the condition of anonymity because the forum was meant to be off the record, said Mr. Bullard had also suggested during his comments that based on the historical record, the market gyrations in response to the Fed’s moves had been less pronounced than might have been expected given how much rates have increased. No such comments were included in the Reuters article.
After the Times published its report, the St. Louis Fed on Thursday released a lengthy statement about the controversy and an unofficial transcript of Bullard’s remarks from the event—which shows he spoke about the market reaction.
“Jim Bullard works hard to maintain the spirit of transparency and active communications to make his views widely known. He shared his views with media before and after the event and covered similar ground in other recent public remarks,” the bank said, adding that “we are listening to the commentary around this and will think differently about this in the future.”
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