FED Bans Members From Trading Crypto, Stocks & Bonds

Under new restrictions that went into effect last Friday, Federal Reserve officials can’t trade a variety of assets, including equities and bonds, as well as cryptocurrency.

The governing Federal Open Market Committee declared that the majority of the limitations would take effect on May 1st, following regulations published in October.

FOMC members, regional bank presidents, and a slew of other officials, including staff officers, bond desk managers, and Fed workers who routinely attend board meetings, will be subject to the new regulations.

Just to try and cover any additional loopholes, these rules will cover spouses and young children as well.

(But what about good friends, trusted confidants or anonymous shell corporations located in Panama? Oh wait, Panama’s not quite as secure with it’s secrets as it once was… after the whole Panama Papers thing. But you know what I mean.)

After further analyzing the issue, the Federal Reserve released a statement where they said “more personnel will become subject to all or portions of these standards.”

The regulations seek to maintain public trust in the Committee’s impartiality and integrity by guarding against even the perception of any conflict of interest.

At least, according to the statement they released.

Following revelations last year that numerous top Fed employees were trading individual stocks and stock ETFs soon before the central bank launched extensive steps targeted at bolstering the economy in the early days of the Covid spread, central bank authorities took action.

Strange that when Boston Fed chief Eric Rosengren and Dallas Fed President Robert Kaplan were caught trading on this information, they weren’t criminally charged or subject to any form of insider trading investigation (as anyone else would have been).

Instead, they simply resigned and brushed everything under the carpet.

[sarcasm] Cool. [/sarcasm]

Maybe they  had to formalize a rule for Fed employees because everyone was trading their inside info so hard that the party got out of hand, which led to Rosengren & Kaplan getting caught.

But who knows?

Anyway… moving on.

Cryptocurrency Prohibition

The announcement on Friday broadened the prohibition to include cryptocurrencies such as bitcoin, which were not included in the original October notification.

Officials who still retain market holdings will have another 12 months to sell them, according to the regulations. Six months will be given to the new Fed officials to do so.

Officials subject to the new guidelines will have to give 45 days’ notice before making any permitted asset acquisitions in the future, a requirement that will take effect on July 1. They must then keep such holdings for at least a year and be prohibited from trading during “periods of heightened financial market stress.” (Like the next few years we might be entering into?)

Of course, there is no formalized meaning to that generalized phrase.

Instead it will be left up to the Fed chair and the board’s general counsel to decide each of it’s co-worker’s cases.

Should they be forced to investigate the actions of one of it’s members who have already been initiated into the brotherhood.

Commodities, foreign currencies, sector index funds, derivatives, short positions, and agency securities, as well as using margin loans to acquire assets, are all prohibited.

Congress has been considering a bill that would prohibit members of Congress from owning individual stocks, but it has not yet been passed.

But as wheels of Congress grind slowly forward, so I think it’s unlikely they will be pursuing this course of action with any level of concentrated effort or zest.