Elizabeth Warren Calls for an Insider Trading Inquiry at the Fed

Mr. Clarida shifted between $1 million and $5 million from a broad-based bond fund to broad-based stock funds on Feb. 27, 2020.

The Fed has said Mr. Clarida was carrying out a preplanned portfolio rebalancing. It declined to comment about when the specific transaction was planned, but pointed out that Mr. Clarida carried out a similar transaction in 2019.

Holding broad-based investments is typically considered best practice for government officials, and it is not unusual for people to rebalance their portfolios. But the timing of Mr. Clarida’s transaction — first reported in his disclosures in May — has garnered attention amid the broader concerns about whether the Fed’s ethics rules are too lax. That’s because it immediately predated a period of aggressive Fed policy action that propped up markets, causing people to question whether Mr. Clarida knew what was coming and moved to profit from it.

Mr. Powell announced on Feb. 28, 2020, that the Fed was closely watching the fallout from the coronavirus pandemic — the first step in a wide-ranging central bank rescue that would ultimately push up stock prices.

Ms. Warren blasted Mr. Clarida’s 2020 move as inappropriate.

“There is no justifiable ethics or financial rationale for him or any other government official to be involved in these questionable market machinations while having access to nonpublic information and authority over decisions that have extraordinary impacts on markets and the economy,” Ms. Warren wrote in her letter.

The trading activity that happened among Fed officials in 2020 was not historically abnormal. Mr. Kaplan traded stocks throughout his tenure. A former Fed vice chair, Stanley Fischer, bought and sold individual stocks, his disclosures for 2016 showed, and Fed governors often rebalance their broad-based portfolios.

But the fact that the transactions happened during a year in which the Fed was so crucial to assets of all varieties has stoked calls for new ethics rules at the central bank. The Fed intervened in the municipal and corporate debt markets for the first time last year, expanding into areas that may not have been considered under the central bank’s existing restrictions.