Fed Vice Chairman Richard Clarida to Resign — 2nd Update
By Nick Timiraos
(Dow Jones) — Federal Reserve Vice Chairman Richard Clarida said he would resign from the central bank on Friday. His term on the central bank’s board expires at the end of this month.
His resignation follows questions raised over financial transactions he conducted at the onset of the coronavirus pandemic.
Mr. Clarida was a top lieutenant to Fed Chairman Jerome Powell, who played a key role in securing Mr. Clarida’s appointment from then President Donald Trump in April 2018. Mr. Clarida, a professor of economics at Columbia University and former economist at bond giant Pacific Investment Management Co., won Senate confirmation in September 2018.
Most notably, Mr. Clarida played a leading role overseeing the Fed’s framework review in 2019, which culminated in 2020 with a significant shift in how the central bank conducts interest-rate policy. Those changes effectively raised the Fed’s inflation target by saying the central bank should take past periods of inflation below the 2% target into account by seeking periods of inflation moderately above that level, especially after intervals in which it was unable to provide more stimulus because interest rates had been cut to zero.
The framework revamp also said officials wouldn’t raise interest rates simply because unemployment rates fall below a level estimated to fuel price pressures — an important turn away from a consensus that had guided central bank policy since the 1980s.
Mr. Clarida’s term on the Fed’s board of governors was set to expire at the end of January, though he could have served for longer, pending the confirmation of a White House nominee to take his seat.
His departure isn’t expected to have a meaningful near-term effect on Fed policy because it was already anticipated he would leave in early 2022. But his absence could nevertheless be important because the Fed’s new framework remains ambiguous, and Mr. Clarida has led the way in fleshing out certain details.
The Fed announced Mr. Clarida’s resignation on Monday afternoon, one day before Mr. Powell is set to testify in the Senate at his confirmation hearing.
President Biden has nominated Fed governor Lael Brainard to become vice chairwoman. The Senate Banking Committee is scheduled to consider her confirmation on Thursday.
Last week, news reports revealed that Mr. Clarida had amended his financial disclosures to show he sold a stock fund three days before he purchased the same investment in late February 2020.
When the initial disclosures first received public scrutiny last year, Mr. Clarida said three financial investment transactions that he executed on Feb. 27, 2020, were part of a preplanned portfolio rebalancing.
The amended disclosures filed last month raised questions over his initial explanation because they showed that three days earlier, on Feb. 24, 2020, Mr. Clarida had sold shares in three stock funds, including the same one he would purchase shares of on Feb. 27 for a similar amount. Stocks fell during those three days amid news reports about the coronavirus’s global spread.
The Fed said the amended disclosures followed inadvertent errors by Mr. Clarida.
In a letter included with the updated disclosures, a Fed ethics officer said, “I continue to believe that Mr. Clarida is in compliance with applicable laws and regulations governing conflicts of interest.”
During a virtual interview at an international finance conference in October, Mr. Clarida indirectly addressed the trading controversy. “I’ve always acquitted myself honorably and with integrity with respect to the obligations of public service,” he said.
Mr. Clarida, in a resignation letter to Mr. Biden on Monday, didn’t mention his financial disclosures and instead focused on the Fed’s response to the coronavirus pandemic in early 2020.
Write to Nick Timiraos at firstname.lastname@example.org
(END) Dow Jones Newswires