Smart Bird: Corrupt Beyond Pale

Dallas Fed President Robert Kaplan Was Gathering His Own Market Intelligence

To be allowed to engage in this unethical conflict-of-interest for years tells us the system is corrupt too. The Dallas Federal Reserve Bank today is refusing to release the required disclosures like the other banks on what their President was trading and when.

Not only was Kaplan trading in and out of “over $1 million” positions in individual stocks but he was also engaging in “over $1 million” transactions in S&P 500 futures, an instrument used by hedge funds and day traders to make leveraged bets on the direction of the market.

The Dallas Fed has refused to say if Kaplan was shorting the market. It has also refused to provide the dates of Kaplan’s trades, despite the fact that the Dallas Fed’s own financial disclosure form requires Kaplan to provide that information. Other Fed Bank Presidents readily comply with providing the dates of their purchases and sells, as do all of the Federal Reserve Board of Governors.

…these businesses thought they were providing confidential market intelligence to an extension of the U.S. central bank – not to provide Kaplan with market intelligence to trade his personal account.

Kaplan would ask CEOs about their companies in monthly official meetings to understand the economy and their businesses, but he would then trade on this private insider information.

Texas is home to some of the largest corporations in America. [includes Tenet]

According to Kaplan’s 2015 and 2016 financial disclosure forms, Tenet Healthcare is one of the stocks he was trading in and out of.

Besides the obvious, the other unanswered question so far was which wall street firms were executing his trades and were aware of his picks.

There is no excuse for the Federal Reserve to NOT have a policy of only investing in short-duration Treasuries while in these positions. One wonders if the Fed would have sat at savings destroying zero percent interest rates for a decade or talk about going negative interest rates if they were suffering from their policies like pension funds and savers.

Instead they are trading the tsunami of money printing like leverage hedge fund managers.

Categories: Perspectives