Federal Reserve Vice Chair Richard Clarida Becomes Third to Resign After Trading Scandal

Federal Reserve Vice Chair Richard Clarida has become the third Fed official to resign after a trading scandal at the central bank.

Clarida announced on Monday that he will resign Friday. This was after new information was revealed regarding Clarida's trading in a stock fund in February 2020, when COVID threatened the global economy and the Fed was considering rescue measures.

In late December 2021, Clarida changed his financial disclosures to reflect that he sold and then rebought shares in the stock fund within a matter of days, according to The New York Times. Clarida had initially only reported the purchases, which were made a day before Chair Jerome Powell said the Fed was ready to support markets and the economy. The Fed said the purchases were just portfolio rebalancing, which was undermined when information of the sale came to light.

Clarida, who was part of an inner circle of Fed officials close to Powell known as the "troika," was set to end his term at the end of this month. In resigning two weeks earlier, he will miss a meeting set for January 25 and 26.

The presidents of two Fed regional banks, Eric Rosengren of the Boston Fed and Robert Kaplan of the Dallas Fed, resigned last year after information regarding their suspicious trading was released.

Although the trades complied with Fed financial ethics rules, they raised the possibility of conflicts of interest because the officials could have profited from the actions the Fed was taking at the time. Critics, notably Senator Elizabeth Warren, a Massachusetts Democrat, sharply criticized the trades and called for a ban on stock ownership by Fed officials.

Kaplan had traded at least $1 million worth of stocks in 22 transactions in 2020. Rosengren invested in an investment fund that held mortgage-backed securities, similar to what the Fed has bought to try to hold down long-term rates.

Clarida began his position in September 2018 after having taught at Columbia University and working for 12 years for the investment fund manager PIMCO. He received deferred bonuses and stock from his work at PIMCO.

When he joined the Fed in 2018, Clarida's financial disclosures, which report assets in a range of values, estimated his wealth at between $9 million and $39 million.

After those resignations were announced, Powell unveiled new ethics rules around trading by Fed board members and other top officials. The rules bar Fed officials from owning individual stocks or bonds and require 45-day advance notice of any trade.

The Associated Press contributed to this report.