There's outrage about stock trading from the Dallas Fed leader

I wrote about the disclosures from Dallas Fed President Robert Kaplan yesterday but I've been surprised to see the amount of blowback, if not anger.

ZeroHedge quoted me in their writeup on the disclosures and that gets to the heart of the matter:

"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."

While we know that Kaplan benefited from the rising stock market, we don't know when the trades were made or even if he directed them.

Kaplan disclosures

That hasn't stopped some very angry responses, including the chief fixing income strategist at Janney:


I suspect we're going to hear more about this in the coming days, particularly on the timing of buying a selling.

In terms of strict rules, there also needs to be changes. The Dallas Fed only bans trading in bank stocks, which is woefully inadequate for an institution that directly affects so many industries.

Given the proliferation of ETFs, I don't see any reason that's a particularly cumbersome demand for top officials.

As for the ethics of it, that might come down to timing but a Fed officials shouldn't be trading floating-rate bond products when it's engaging in QE. On top of that, Kaplan was a voter last year.

Some of the company names also raise questions: Delta, JNJ and oil companies were certainly impacted by the pandemic and Kaplan buying while the Fed was providing a backstop is problematic.

I don't think there should be quite the rush to judgement until we have more details but he certainly has some questions to answer, and I think it's entirely fair to question his judgement.

Those questions might come within hours as Kaplan speaks at 6 pm ET (2200 GMT) in a virtual town hall.