Eleven of the 12 regional Fed banks have published disclosures of their leaders’ 2020 financial profiles, sharing information that gives insight into the holdings of officials who help set the central bank’s monetary policy and thus directly affect all capital markets, especially stocks. Their stocks too.
What was notable is that while most regional Fed leaders reported modest financial holdings and smaller transactions, president of the Dallas Fed Robert Kaplan, a former vice chairman at Goldman who was responsible for the firm's investment banking activities before leaving in 2006 and becoming a profressor at Harvard, who we now learn that at the same time that he was advocating for unlimited quantitative easing and "keeping interest rates at zero until well into 2022 or even 2023", made "multiple million-dollar-plus stock trades in 2020" according to the WSJ.
According to the disclosure form provided by the Dallas Fed, Mr. Kaplan had a total of 27 individual stock, fund or alternative asset holdings each valued at over $1 million. Mr. Kaplan’s stockholdings included Apple Inc., Amazon.com Inc., Boeing Co., Alphabet Inc., Facebook Inc. and Marathon Petroleum Corp.
Kaplan's disclosure form shows the former Goldman vice chair made some combination of sales or purchases of over $1 million in 22 individual company shares or investment funds. These transactions included Apple, Alibaba Group Holding Ltd. , Amazon, General Electric Co. and Chevron Corp.
A closer look at Kaplan's holdings shows a stake in the 'Big Rub BBQ' and the Kansas City Royals baseball team. He's one of the 22 owners of the team, a stake he purchased in 2019.
On the transaction side, there wasn't much detail: transactions above one million dollars, which was most of them, were listed as "multiple" without further details. Amid the multiple transactions, we learn that stocks Kaplan bought exclusive, without any offsetting sales included Apple, Google, Oracle and a Latin America ETF.
As ForexLive's Adam Button notes, "Based on the holdings, it's safe to say that he had a very good year last year even with the drag from energy shares. Of course, when you know the Fed will bail out the entire financial system and keep the party going no matter what, it's easier to buy big."
Kaplan's full disclosure form can be found here.
Among the outraged responses to the realization of Kaplan's conflicts of interest - after all, the Dallas Fed president personally stood to profit from monetary policy that encouraged capital markets - was that of Sven Henrich who observed that "the Fed guys are personally actively trading the markets they influence more than anything else. Go figure. When are we officially declaring a Banana Republic?"
Well, well, well.— Sven Henrich (@NorthmanTrader) September 7, 2021
The Fed guys are personally actively trading the markets they influence more than anything else. Go figure.
When are we officially declaring a Banana Republic? https://t.co/gP0lKeWSQE
Slamming the Fed's endless conflict of interest, Henrich blasted that it's "bad enough that the Fed Chair position is a guaranteed multi million dollar speaking fee gig virtually ensuring the banks who dish out hundreds of thousand of dollars per zoom speech are kept happy and Fed supported. The conflicts of interest stink to high heaven." Mocking the Fed's desire to "avoid a taper tantrum", he than said that "what might be the right economic policy gets shoved under the rug that is the personal financial interests of those that are tasked with the decisions."
He concluded rhetorically: "How about a true independent audit of all the conflicts with $ interests?"
Obviously, that will never happen.
While other Fed president were less active in capital markets, they too stood to benefit from favorable outcomes in the market they dominate: in the forms provided for the other bank presidents, most reported modest holdings of investment funds and little in the way of large stock trading. Boston Fed chief Eric Rosengren listed a number of stock trades under “joint” status in transactions that were each $50,000 or less, for example. Richmond Fed leader Thomas Barkin, who was a senior executive at management consulting firm McKinsey & Co. before becoming bank president, listed a number of financial holdings each in excess of $1 million.
Atlanta Fed leader Raphael Bostic flagged on his form a number of property holdings that were associated with mortgages, while the Boston Fed leader also had a rental property. Kansas City Fed leader Esther George reported a stake in a farm.