Courtesy of Pam Martens
Robert Kaplan, President of the Dallas Fed
Dallas Fed President Robert Kaplan is due to step down today after playing a central role in creating the worst trading scandal in the Federal Reserve’s 108-year history.
Not only was Kaplan trading in and out of “over $1 million” positions in individual stocks but he was also engaging in “over $1 million” transactions in S&P 500 futures, an instrument used by hedge funds and day traders to make leveraged bets on the direction of the market. As Wall Street On Parade previously explained, a dozen legal safeguards had to fail to allow this to happen.
The Dallas Fed has refused to say if Kaplan was shorting the market. It has also refused to provide the dates of Kaplan’s trades, despite the fact that the Dallas Fed’s own financial disclosure form requires Kaplan to provide that information. Other Fed Bank Presidents readily comply with providing the dates of their purchases and sells, as do all of the Federal Reserve Board of Governors.
On Wednesday, we sent an overnight letter to Thomas J. Falk, the Deputy Chair of the Dallas Fed Board of Directors, who is one of the three Dallas Fed Board Members appointed by the Federal Reserve Board of Governors to represent the public. Falk is the retired former Chairman and CEO of Kimberly-Clark, thus we felt he could readily appreciate his fiduciary duty to comply with existing rules and regulations and fulfill the public’s right to know. We asked that Falk instruct staff at the Dallas Fed to comply with our previous requests for the dates of Kaplan’s transactions.
Senator Elizabeth Warren has called on the Securities and Exchange Commission to open an investigation into insider trading by Fed officials. Boston Fed President Eric Rosengren has also stepped down from his post after his trading in and out of stocks and REITs came under fire. Media questions are also being raised about one large trade done by the Federal Reserve Board’s Vice Chair, Richard Clarida, who sold between $1 million and $5 million in a bond fund and moved it into stock funds in February of 2020, on the eve of Fed Chairman Powell issuing a statement suggesting policy action from the Fed in response to the pandemic.
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