Robert Kaplan will step down as president of the Federal Reserve Bank of Dallas early next month, the Dallas Fed announced Monday. Kaplan, 64, became the second senior Fed official to announce that he is resigning after ethics questions were raised this month over their trading activity in the financial markets.
Kaplan’s resignation follows a similar announcement earlier Monday by Eric Rosengren, president of the Boston Fed. The two officials’ financial disclosures sparked criticism from government watchdogs after they revealed extensive stock trading in 2020, when the Fed was spending trillions of dollars stabilizing financial markets and boosting the economy. Because of their trading, the two officials could potentially have profited from the Fed’s actions.
Though the investments by Rosengren and Kaplan were permitted under the Fed’s rules, they raised at least the appearance of conflicts of interest, which Fed policy discourages. Sen. Elizabeth Warren, a Massachusetts Democrat, sharply criticized the trades and urged Fed Chair Jerome Powell to bar stock ownership by Fed officials.
“The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy,” Kaplan said in a statement. “Unfortunately, the recent focus on my financial disclosure risks becoming a distraction.” Kaplan said he would resign Oct. 8.
Last year, Kaplan made trades worth at least $1 million in 22 stocks and index funds, including Amazon, Chevron, Facebook, and Johnson & Johnson.
Rosengren had invested in funds that owned mortgage-backed bonds, the same kind that the Fed has been buying hundreds of billions of dollars’ worth this year.
Rosengren said earlier Monday that he is retiring this week for health reasons. He became eligible last year for a kidney transplant and said the stress of working at the Fed during the pandemic recession worsened his health.
“It has become clear that I should aim to reduce my stress so that I can focus on my health issues,” Rosengren said in a written statement.
Rosengren and Kaplan, like all 12 regional Fed bank presidents, are members of the Federal Reserve’s policymaking committee, with rotating votes roughly every three years. Neither had votes this year, but they contributed to the Fed’s interest rate projections, which last week showed the Fed was considering hiking its short-term rate, currently at nearly zero, by the end of 2022.
Both are also considered relatively “hawkish” policymakers, meaning that they often favour higher interest rates to counter inflation.