Two Regional Fed Presidents Are Retiring—Who Will Replace Them?
Two major Fed officials are retiring following an inquiry into their personal portfolios of individual stocks. Who will take their places?
Sept. 28 2021, Published 10:48 a.m. ET
Amid a probe into Fed officials' individual stock trading portfolios, two regional Fed presidents have officially announced their retirement. Robert Kaplan (President of the Federal Reserve Bank of Dallas) and Eric Rosengren (President of the Federal Reserve Bank of Boston) are stepping down much sooner than expected.
While only one of the soon-to-be retirees has related the decision to the stock holdings issue, both of the officials' decisions are undoubtedly tied to the ongoing investigation.
Fed officials were singled out for individual stock trading, including Kaplan and Rosengren.
Senator Elizabeth Warren (D., Mass) wrote a letter to the Federal Reserve urging all officials to eliminate their individual stock trading positions.
Soon afterward, the issue gained enough relevance for Fed Chair Jerome Powell to take it on. Powell initiated an investigation into Fed officials' stock trading habits to redefine the ethics and rules for trading within the organization as needed.
Kaplan and Rosengren planned to exit their positions.
Rosengren and Kaplan were two of the highest-level individual stock traders in the Fed. After the public got wind of their practices, the two announced that they would be exiting their positions.
Kaplan, who traded more than $1 million in individual stocks in 2020, announced he planned to exit all of his positions by Sept. 30. He would redirect the investments into diversified index funds or savings accounts.
Why active trading and monetary policy don't mix
Someone who influences and decides on fiscal policy should be as unbiased as possible. Actively trading with individual stocks means officials are more likely to make policy decisions based on what benefits their holdings.
Meanwhile, constituents aren't getting policy that's best for them. Those who are rich and in the know benefit while the poor and middle class struggle.
Kaplan and Rosengren are retiring.
Kaplan and Rosengren have both announced that they're retiring on Oct. 8. This will save them from having to sell their stocks.
Kaplan has been outspoken about why he's retiring. He said, "The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work."
Rosengren has been more reserved about his claims and cited health issues as his reason for retiring.
Who will replace the retiring regional Fed presidents?
In Boston, Kenneth Montgomery will take over for Rosengren as interim president and CEO. Montgomery is currently the Boston Fed's first vice president and chief operating officer. The Federal Reserve has a standard procedure that states that the VP will fill the head role if the president steps down. The hunt for an official successor is on.
In Dallas, the regional Fed hasn't made an official announcement, but protocol suggests that first vice president and chief operating officer Meredith Black will step in on Oct. 8 when Kaplan officially leaves his post. The hunt is also on for an official successor in Dallas.