A year after resigning as Vice Chair of the Federal Reserve, Richard Clarida is enjoying what has become an increasingly common second act among former government officials: a media career.
Formerly second-in-command to Chair Jerome Powell, Clarida – who is also now a managing director for investment giant PIMCO – frequently pops up in the press these days to share his thoughts on the economy. He has become a regular guest commentator on CNBC and Bloomberg, and his quotes have appeared in outlets like The New York Times.
Largely absent from these media appearances is discussion of why Clarida is no longer at the Fed: alleged insider trading.
Last January, Clarida resigned from his post shortly after it was revealed that he had failed to disclose huge stock trades made in February 2020, just days before the Fed intervened to stabilize the economy from the pandemic. Clarida would have known that the Fed was planning to take unprecedented steps to directly intervene in the economy and prop up industries roiling under the early pandemic shutdowns and confusion. At a time when everyone was selling, Clarida’s decision to buy is conspicuous.
At least two other top Fed officials — former Regional Bank Presidents Robert Kaplan and Eric Rosengren — also made suspiciously-timed trades in early 2020. This scandal has gone unmentioned in Clarida’s last five CNBC spots.
So, what topics are discussed in Clarida’s recent media hits (hint: not his hobby as a singer-songwriter)? In nearly every television appearance he’s made since resigning in disgrace, Clarida has been a reliable cheerleader for Powell’s disastrous plan to fight inflation on the backs of workers through continued interest rate hikes.
In a November ‘Closing Bell’ spot on CNBC, Clarida praised Powell’s rate hikes and downplayed the chance they would lead to a recession. In Clarida’s words, the labor market “would have to adjust […] either through unemployment, participation, or vacancies.” He repeated these arguments in a subsequent appearance on the show in January, saying that the “risk of inflation getting out of hand” was as bad as mass layoffs induced by rate hikes, and that “some rise in unemployment will likely be required.” While he did (briefly) acknowledge the role of supply chain bottlenecks and the War in Ukraine in the earlier months of the inflation surge, Clarida did not discuss how corporate price-gouging has remained a key driver of inflation, despite recent examples from monopolistic oil, agriculture, and rental housing companies.
When asked during a December CNBC interview whether Powell was ignoring prior signs of inflation cooling and risked overtightening into a hard landing, Clarida offered a telling defense, saying: “There’s a risk to the institutional credibility of the Fed if it does not bring down inflation.”
Clarida’s statement — completely lacking in self-awareness about the damage his own insider trading did to the Fed’s credibility — echoes what my colleague Max Moran said about Clarida’s burgeoning media career months earlier in The Prospect: “To most of the CNBC hosts, the harm Clarida did to the Fed’s credibility was not through his potential insider trading, but by not raising rates when he had the chance.”
Indeed, as the Fed began upping rates right as inflation started to cool on its own, hawks across the mainstream media started invoking the central bank’s “credibility” to goad Powell into keeping up the crunch on workers. “Credibility” is a telling euphemism: it implies that the most important thing about monetary policy is the policymaker’s standing among other elites, not the intense pain inflicted on average Americans, or even the actual state of the macroeconomy. Insider traders don’t seem to harm the Fed’s credibility in the eyes of Clarida’s platformers, because pointing out his unethical behavior might make him and his pals in the policymaking community less likely to come on a show or talk to a reporter. Choosing not to deliberately throw millions of people into poverty, however, apparently poses a grave risk to the Fed’s credibility: it might make the policymakers look like wusses.
In the unlikely event that Clarida were asked again about his trading scandal on-air, I suspect he’d point to a 2022 report from Federal Reserve Inspector General Mark Bialek which purportedly clears him of any wrongdoing. As my former colleague Eleanor Eagan wrote in October 2021, there’s a big problem with this report: Bialek was appointed by the very Board whose trading he was tasked with investigating.
“The Federal Reserve Board of Governors not only appointed Inspector General Mark Bialek, but has the power to remove him at will, by a vote of two-thirds of its members. (Note that three of six Governors have had their trading come under public scrutiny, and it is not unimaginable that more could become implicated). […] The set up at the Federal Reserve is even weaker than at Cabinet departments; it is analogous to having given then-Secretary of State Mike Pompeo the power to fire the State Department’s Inspector General for investigating him, rather than making Trump himself own the termination.”
(Some unsolicited advice for Clarida if he’s hoping to use Bialek’s report as a defense: the “Totally Exonerated, No Wrongdoing” argument didn’t go well for the last guy who used it.)
It’s worth looking back at the Clarida scandal for a couple of reasons, not the least of which is the total lack of negative consequences for him and his compatriots. Former Regional Bank Presidents Robert Kaplan and Eric Rosengren have quickly made their way back into polite society. Kaplan is the chairman of two nonprofits and serves on the boards of Harvard Medical School and Rice University’s Baker Institute. Rosengren is a Visiting Scholar at MIT’s Sloan School of Management (a job he landed just two months after resigning from the Fed) and operates a secretive eponymous consulting firm. Similarly, allegedly insider-trading former Senator Richard Burr landed a plum revolving-door job at lobbying firm DLA Piper last month, just weeks after leaving the Senate.
Like they’ve done with Clarida, the mainstream media has helped these skeevy profiteers rehabilitate their image. Politico’s report on Burr’s new job lobbying the federal government on health policy and pandemic preparedness makes no mention of his pandemic-related trading scandal. Rosengren enjoyed a fawning CNBC interview last November that features plenty of justifications for rate hike-induced unemployment, but no mention of why Rosengren himself is no longer at the Fed.
The Fed remains awash in ethics scandals today, well after Clarida and company’s departures. Powell — whose renomination will likely go down as one of Biden’s biggest economic policy blunders — was himself caught making millions in suspiciously-timed trades in 2020 and has faced relatively little scrutiny from Congress about it (like Clarida, Powell was “cleared” of wrongdoing by IG Bialek last year). Powell’s pledge to revamp the Fed’s ethics rules has been murky and noncommittal at best, and his new Vice Chair for Supervision is the notoriously ethically-conflicted Michael Barr. And as The Intercept’s Dan Boguslaw and Ken Klippenstein recently reported, the Powell-led Fed remains dangerously close to banking industry lobbyists — despite the institution’s supposed “independence” from an industry it is supposed to regulate.
Most importantly, Clarida’s turn as a “credible” media pundit comes as Biden faces the crucial task of filling Clarida’s old job. The recent departure of Lael Brainard — Clarida’s successor as Fed Vice Chair — to lead the National Economic Council has left a seat on the Federal Reserve vacant. Alarmingly, as my colleagues Max Moran and Henry Burke have recently written, two of the leading candidates to fill it are neoliberal economist Karen Dynan (a supporter of Social Security cuts and further interest rate hikes) and Wall Street economist Seth Carpenter (whose employer Morgan Stanley is under SEC investigation for — you guessed it — potentially exploiting insider information.) As Brainard was one of the few Board members during Powell’s tenure to neither engage in pandemic stock trading nor support his hawkish rate hikes, Biden must choose her replacement wisely: will the Fed’s next Vice Chair stand up for working people, or get (even more) rich off their suffering?
It is crucial to appoint an uncaptured reformer to the Fed who will stand up to Powell’s misguided monetary policy and loose ethical standards. America needs more regulators who will put the public first. We have enough profiteers and pundits.
IMAGE: “Clarida Swearing-In”, Federal Reserve Board of Governors