James Bullard, President of the Federal Reserve Bank of St. Louis, spoke last Friday at an informal, supported-only forum convened by Citigroup, and open to clients, on the sidelines of World Bank and International Monetary Fund meetings. Annual Meetings in Washington.
Mr. Pollard’s comments touched on both monetary policy and financial stability issues during a turbulent week in the global economy. This was the type of event the news media could attend due to the possibility of news of market moves, but Mr. Pollard and his crew did not alert reporters.
A spokesman for the Federal Reserve Bank of St. Louis said Mr. Pollard was not compensated for his speech. But it appeared behind closed doors and to Wall Street investors at a critical juncture for markets, when every comment made by a central bank has the power to move stocks and bonds. It gave attendees a behind-the-scenes glimpse into the Fed policymaker’s thinking for the vote and Citi a potential opportunity to benefit from his comments, as clients could use the bank’s services in hopes of gaining similar access in the future.
“It’s not normal,” said Narayana Kocherlakota, the former president of the Federal Reserve Bank of Minneapolis. With the involvement of a bank’s customers, he added, “the optics are awful.”
The St. Louis Fed called the discussion informal and said Mr. Pollard had participated in the event in the past. He also indicated that he gave an interview to Reuters Earlier today with statements similar to those he made at the Citi event, he appeared on other forums in Washington on Friday and Saturday. As a result, they said, the public was able to see his views.
But the person who attended the speech, who spoke on the condition of anonymity because the forum was meant to be off-putting, said that Mr. Pollard also suggested during his comments that based on the historical record, market volatility in response to the Fed’s moves was less clear than It was to be expected given the amount of price increase. Such comments were not included in the Reuters article.
a A copy of the event was released By the St. Louis Fed on Thursday afternoon, after The New York Times reported on this, confirmed that Mr. Pollard had discussed the market’s reaction.
A St. Louis Fed spokesman said Mr. Pollard has publicly shared this view of financial stability before.
At the Citi event, Mr. Pollard reiterated his view that another large three-quarter rate increase may be appropriate in December, as noted by the Reuters article.
“He shared his views with the media before and after the event and took up similar ground in other public statements recently,” the St. Louis Fed said in the statement posted online Thursday. “But we are listening to comment about this and will think differently about this in the future.”
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This wasn’t the first time a Federal Reserve official had spoken before an invite-only group of people who might have benefited from speaking to him. In March 2017, Stanley Fisher, Vice Chairman of the Federal Reserve, gave an award closed letter at the Brookings Institution that sparked some protest. More commonly, Federal Reserve officials meet with economists and traders from banks and investment funds in small groups to share information about markets and the economy.
Fed officials speak regularly at banking events, although their observations are usually reported to the media and either open to them, broadcast or recorded. Such was the case with the UBS event where Mr. Pollard was a speaker on Saturday.
What we consider before using anonymous sources. Do you know the sources of information? What is their motive for telling us? Has it been proven reliable in the past? Can we confirm the information? Even as these questions satisfy, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.
What is remarkable about Mr. Pollard’s Citi meeting is that it was neither an information gathering trip with a handful of people nor a publicly available speech. About 40 people attended the event, which had an official agenda and was announced to Citi clients, two people familiar with the event said. Mr. Pollard spoke for 10 minutes before answering questions from the audience.
“It is important, even mission critical, that the Fed is in an open dialogue with all sectors of the economy,” said Caleb Nygaard, who studies central bank at the University of Pennsylvania. “A lot of the message, as well as the spirit, is that central bankers are supposed to be on the receiving end.”
The Citi forum also included central bank governors from outside the US – including Anna Breimann, the deputy governor of Sweden’s Riksbank, and Olli Rehn of the European Central Bank’s Governing Council – but at least some of their appearances have been reported in the news. The media and some of them words have been posted.
It is not clear whether Mr. Pollard’s speech is in violation Fed Connection Rulesbut some outside experts said they looked like they were tiptoeing close to the line.
Fed rules do not explicitly prohibit central bankers from holding closed-door meetings, although they say that “to the extent possible, committee participants will refrain from describing their personal views on monetary policy in any meeting or conversation with any individual or company. OR which organization can profit financially” unless such views are already expressed in its public communications.
The rules also state that the appearance of officials “shall not give any person or for-profit organization a prestige advantage over its competitors”. Citi’s ability to offer a closed session with a central bank official may have given him such an advantage, even if his comments didn’t break major news.
“Citi is showing off here” in its ability to offer “privileged access,” said Jeff Hauser, director of the Oversight Group’s Revolving Door Project, explaining that for investors, the opportunity to understand real-life central bank thinking is a valuable source of financial intelligence.
“There are few better sources of information on the planet than a FOMC member,” he added. “Everything they say is being treated as potentially market moving.”
The Federal Reserve and Citi declined to comment.
The news comes as the ethics scandal that has plagued the central bank for more than a year looks like it is about to resurface.
The Fed’s ethical rules came under scrutiny last year after three central bank officials found They conducted financial transactions during 2020, when the Fed was actively supporting markets at the start of the coronavirus pandemic and officials had access to market moving information.
All three resigned early, although some cited unrelated reasons, and the Fed embarked on an overhaul of its trading rules. But last week, one official – Rafael Bostic, president of the Federal Reserve Bank of Atlanta – reveal it Failed to properly report trading activity in a managed retirement account for several years. His retirement account had several trades on key dates in the 2020 market crash, though he said he had no knowledge of the specific trades, because he used an outside money manager.
Norman Eisen, a senior fellow in governance studies at the Brookings Institution and an expert on law, ethics and anti-corruption, said Mr. Bostick’s careers seemed “benign” to other officials.
Of Mr. Pollard’s appearances, he said at first glance, “It’s not a breach of morals, but it’s not a great appearance.”
News that Mr. Pollard spoke at a private event attended by the bank’s clients began to anger lawmakers on Thursday. The Federal Reserve answers to Congress, which can change the law that authorizes it. Lawmakers on the Senate Banking Committee and the House Financial Services Committee regularly question senior central bank officials, including President Jerome H. Powell, while giving evidence on Capitol Hill.
“Fed officials are making fun of morality,” Senator Elizabeth Warren, a Massachusetts Democrat and frequent critic of the central bank, said in a statement, accusing the central bank of a “culture of corruption.”
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