Boston Fed Chairman retires amid trade controversy, and it’s a shame


“It became clear that I should aim to reduce my stress so that I could focus on my health issues and postpone my need for kidney dialysis for as long as possible,” Rosengren said. said in a letter to Federal Reserve Chairman Jerome Powell. As he spent long hours under the pressure of the rapid roll-out of pandemic relief programs, “unfortunately my kidney function declined dramatically to the point that I qualified for the kidney transplant list in June 2020” , he wrote in the letter, which was released by the Boston Fed.

His long-standing kidney problems weren’t widely known within the Fed, according to two people with knowledge of the situation. A spokeswoman for the Federal Reserve in Washington did not respond to whether Rosengren had previously disclosed her condition to central bank officials.

Rosengren’s departure is a loss for Boston and the rest of New England. He has been a calm but persistent advocate of enlightened economic stewardship. He pushed Fed officials to think beyond the complex workings of the financial system to understand the impact of their decisions on those battling systemic wealth inequalities and racism.

And it’s a shame that Rosengren has to leave under a cloud.

Earlier this month, a watchdog called Better Markets called on Rosengren and Dallas Fed Chairman Robert Kaplan to step down after disclosing trades made last year when the Fed took extraordinary action to support economy and financial markets. The transactions were included in financial disclosure forms filed annually by senior Fed officials.

“No one at the Fed should have traded” as hundreds of thousands died and millions were laid off, said Dennis Kelleher, chief executive of Better Markets. “They clearly violated any reasonable reading of the Fed and regional bank codes of conduct.”

Rosengren acted quickly to get ahead of the problem. He said he was in compliance with Federal Reserve ethics rules, but chose to offload his investments to avoid “even the appearance of any conflict of interest.”

On Monday, hours after Rosengren announced he was retiring, Kaplan, 64, a former Wall Street banker, said he would step down because the scrutiny of his investments “becomes a distraction.”

Criticizing that the Fed’s personal investment rules are too loose is more than fair. Don’t be shocked if the central bank ends up tightening them following a review ordered last week by Powell.

But now Rosengren is the main character in an ethical controversy, and skeptics will say his health issues are just an excuse to bow out.

I have no way of knowing for sure, but I would be stunned if Rosengren intentionally breaks Fed rules to trade for personal gain. Ask anyone who knows him: there is no guy more upright than Rosengren.

“His integrity is beyond reproach,” said John Fish, managing director of Suffolk Construction and former chairman of the Boston Fed. “His reputation means everything to him. He’s not here for the money.

“It’s really unfortunate that he has to retire now,” said Cathy Minehan, who was Rosengren’s boss when she was president of the Boston Fed from 1994 to 2007. “He did a fabulous job. “

A Boston Fed spokesperson said Rosengren declined to comment beyond his statement.

Powell made a good call when he made a “Fresh and comprehensive review” rules of financial ethics for Fed officials, including members of the Federal Open Market Committee, or FOMC, which sets interest rates and other monetary policies.

But he should have defended Rosengren’s hard-earned reputation in the process. Instead, he told a press conference last week: “No one on the [FOMC] is happy to be, to be in this situation, to have these questions raised.

In a statement released Monday by the Boston Fed, Powell praised Rosengren, saying he had “distinguished himself time and time again in more than three decades of dedicated public service within the Federal Reserve.” .

Too little, too late.

After rising through the ranks, Rosengren took over the Boston Fed in 2007 at the start of the mortgage market crisis which, the following year, threatened to bring down the banking system. He tried to soften the impact of the ensuing recession on homeowners, with the Boston Fed holding foreclosure prevention workshops at Gillette Stadium and elsewhere.

This defined the tenor of his leadership, under which the Boston Fed extended its reach beyond the financial system to New England communities. He has become a strong advocate within the Fed for paying close attention to the impact of his policies on low and moderate income families.

Rosengren was a champion of a Boston Fed program called the Challenge of working cities, which was designed to foster collaboration between businesses, nonprofits, and city leaders to address issues affecting low-income residents.

During the pandemic, the Boston Fed took the initiative to implement the Main Street Loan Program, which was intended to help small and medium-sized businesses but has had limited success. Rosengren also teamed up with other regional Fed presidents leading forums on racism and economics, seeking to understand and address major racial challenges in the US economy.

“If you’ve spent any time with Eric. . . you know he cares deeply about the impact the Fed has on ordinary Americans, ”said Corey Thomas, CEO of Boston cybersecurity firm Rapid7 and vice president of the Boston Fed.

Given Rosengren’s direction, it would be fitting that the next Boston Fed chief was a person of color. The Fed is dominated by white males, both in Washington and in regional banks.

Kenneth C. Montgomery, senior vice president and chief operating officer of the Boston Fed, will serve as interim president until Rosengren’s successor is appointed, a process that could take about six months, a said the Boston Fed. A research committee will be made up of the six non-banker directors of the Boston Fed and will be chaired by the bank’s president, Christina Paxson, who is president of Brown University. Their choice must be approved by the Federal Reserve Board of Governors in Washington.

“Eric is one of those few people who combines the highest standards of intellectual rigor with the warmest collegiality, inclusiveness and humanity,” Paxson said in the release.

These qualities should be at the top of the list, as she and her fellow board members seek to fill some really big shoes.

Larry Edelman can be reached at [email protected] Follow him on twitter @GlobeNewsEd.

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