There must be some brain function that turns off as folks climb the ranks of power. They can’t see a conflict to save their lives, or even just their careers. Three senior Federal Reserve officials were dabbling in individual stock trades, with some of the transactions occurring on the eve of Fed announcements on interest rates. See, if you know what the Fed is going to say before it says so, you can position yourself favorably the day before and not take the hits the other poor schlubs do. Schlubs would be those just trying to scrimp and limp along as they squirrel away shekels for their retirements.
Congress is demanding an investigation and clearly wants heads to roll. Meanwhile, the chair of the Federal Reserve is begging Congress to leave it alone and let them solve the problem. Here’s the problem with the Fed solving the problem. They are quick to poo-poo the allegations, calling the officials’ trading actions “pre-planed” so that they could not possibly cross any lines. If Fed officials are dabbling in individual stock trades it is impossible for them to defend themselves. Talking yourself blue in the face will not convince those following along at home that the powerful are not corruptly trading, using the policies they have developed to protect them from conflicts allegations and investigations.
The resignations were necessary and appropriate. Going forward, the Fed will need to take affirmative steps to remove those who are trading in individual stocks in their personal portfolios. It’s an Alfred E. Newman moment, “What me worry?” followed by, “You just don’t understand.” Sure don’t — because we understand conflicts. This is a “Don’t do it,” because disclosing the trades, which they did not do until discovered by reporters, would raise eyebrows and questions. Right there, that’s all you need to know about conflicts.