Key Fed official was under investigation over stock trades, filing shows
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Former Federal Reserve governor Adriana Kugler, during the central bank's board meeting in June. Photo: Al Drago/Bloomberg via Getty Images
Former Federal Reserve governor Adriana Kugler was referred for investigation earlier this year for allegedly breaking the central bank's stock trading rules, per new financial disclosures released on Saturday.
Why it matters: The documents provide a backdrop for Kugler's surprise resignation in August, which opened up a vacancy for President Trump to further leave his mark on the Fed.
The big picture: Kugler, appointed by former President Biden in 2023, was the subject of an ethics probe, according to annual disclosures published by the U.S. Office of Government Ethics.
- The disclosures show purchase and sales of individual stocks in 2024, including shares of Cava and Southwest Airlines, during so-called blackout periods — a stretch during which top Fed officials are banned from trading ahead of a Fed interest rate decision.
- The Fed also prohibits the buying and selling of individual stocks by officials or their close family members, as well as short-term trades (all investments must be held for a year).
- An endnote on the disclosure form says that at least some trading was conducted by Kugler's husband without her knowledge.
Zoom in: A Fed official said that Kugler requested permission from Fed chair Jerome Powell to deal with prohibited holdings ahead of the Fed policy meeting last July. That clearance was denied.
- Kugler was absent and did not vote at the two-day policy meeting that ended on July 30. Two days later, she announced her resignation.
What they're saying: The filings show the Fed declined to certify that Kugler's disclosures were in step with the trading rules.
- "Consistent with our standard practices and policies, matters related to this disclosure were referred earlier this year" by the Fed's ethics office to an independent watchdog, according to a note attributed to Fed ethics official Sean Croston.
Flashback: Powell tightened trading rules in 2021 after a rare scandal embroiled the central bank. It was an effort to remove even the suspicion that officials were financially benefiting from inside information.
- Whether the Fed decides to raise or cut rates — and what officials hint about policy decisions to come — can have huge sway over financial markets.
- In 2021, two officials left the central bank after their financial disclosures showed that they had owned, and been trading, assets as the Fed took huge steps to rescue the pandemic-hit economy. In 2022, the Fed's second-in-command left the post after questions about his trading activity.
The intrigue: The Trump administration tapped White House economist Stephen Miran to replace Kugler on the influential Fed Board of Governors in September.
- Miran, who has twice dissented in favor of larger rate cuts, will serve in the post until at least January, when the seat's term expires.
What to watch: The new revelations about Kugler's financial transactions come at a critical moment for the central bank, which is under intense scrutiny from a White House that has been demanding lower rates.
- Trump is expected to announce a new leader for the Fed by year-end, who will replace Powell when his term as chair expires in May.
- Trump moved to fire Fed governor Lisa Cook, though the Supreme Court will decide whether that is legal next year.
- The terms of 12 Fed presidents end in February. Fed governors will decide whether those officials will be reappointed.
- The Atlanta Fed's Raphael Bostic, who the Fed in 2022 was asked to investigate over his financial disclosures, said he would retire ahead of that reappointment process.
