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Angry lawmakers accuse Fed of inaction in insider trading investigation

<i>Al Drago/Bloomberg/Getty Images</i><br/>The Marriner S. Eccles Federal Reserve building is seen here in Washington
Al Drago/Bloomberg/Getty Images
The Marriner S. Eccles Federal Reserve building is seen here in Washington

By Elisabeth Buchwald, CNN

(CNN) — Congressional lawmakers grilled Federal Reserve Inspector General Mark Bialek Wednesday over possible insider trading among Fed officials in 2020, accusing the nation’s central bank of inaction.

The heads of the Boston and Dallas Federal Reserve banks retired early in 2021 after trades they made before and during the pandemic came to light. Bialek said his investigation into any potential legal violations from the trades is “ongoing.”

A separate investigation by Bialek last year found no wrongdoing stemming from trades by a financial adviser on behalf of Fed Chair Jerome Powell’s family trust and by former Fed Vice Chair Richard Clarida.

Bialek told members of a Senate Banking Subcommittee on Economic Policy that he was limited in what he could disclose because it would impede his ability to “conduct a thorough, independent investigation” into the former regional bank heads’ trades.

Sen. Elizabeth Warren, D-Massachusetts, interrupted: “You have had a year and a half,” she said. “This is not strong oversight. In fact, it is not even competent oversight.”

As Republican and Democratic lawmakers on the subcommittee pointed out, Bialek, who has served in his role since 2011, is appointed by members of the Fed’s Board of Governors, whom he is tasked with investigating. Bialek told lawmakers there was no conflict of interest and that he was still able to conduct fair, independent investigations. Warren, among others, said she was unconvinced.

“It looks like, to anyone in the public, that you gave your boss a free pass,” she said. “The Fed continues to stonewall Congress, stonewall the public on the underlying information about these trades. This is not acceptable.”

The Office of Inspector General declined to comment Wednesday night.

Renewed push for an independently appointed Inspector General

After Silicon Valley Bank collapsed in March, Warren and Republican Sen. Rick Scott of Florida introduced a bill to require a presidentially appointed, Senate-confirmed inspector general to the Fed Board of Governors.

A separate Fed investigation into SVB’s collapse, not involving Bialek, faulted Fed supervisors. Scott on Wednesday said he lacked confidence in Bialek’s ability to investigate those Fed supervisory lapses.

“Somebody at the Federal Reserve that was responsible for these banks for supervision clearly did it wrong,” he said Wednesday, referring to bank collapses since 2008. “The average person in America pays for all this.”

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