Boston Federal Reserve President Eric Rosengren speaks during a round table discussion at Silver Lane Elementary School, in East Hartford, Conn., on Nov. 25, 2019.Steven Senne/The Associated Press
Boston Federal Reserve President Eric Rosengren said Monday that he will retire this week and disclosed that he has qualified for a kidney transplant.
Rosengren’s announcement comes after investments by him and other Fed officials last year raised questions about the Fed’s ethics rules. Rosengren had already planned to retire in June when he reached the Fed bank presidents’ mandatory retirement age of 65, but said he decided to retire Thursday to focus on his health.
Rosengren, like all 12 regional Fed bank presidents, is a member of the Federal Reserve’s policy-making committee, with a rotating vote roughly every three years. Rosengren was scheduled to vote next year. He is a moderately hawkish policy maker, meaning that he often favours higher interest rates to counter inflation. In early August he said in an Associated Press interview that the Fed should announce in September a reduction in its $120-billion a month of bond purchases as a first step toward reining in the Fed’s low-rate policies.
The central bank did not take that step at its meeting last week but Fed Chair Jerome Powell signalled the Fed will likely do so at its next meeting in November.
Rosengren has worked at the Boston Fed for 35 years and spent the last 14 as president. During the pandemic, the Boston Fed oversaw the Main Street Lending program, the Fed’s first attempt since the Great Depression to provide loans directly to small businesses. The Boston Fed is now researching how a digital currency issued by the Fed might work.
“While working on the pandemic relief programs … given the long hours and stress, regrettably my kidney function declined significantly,” Rosengren said in a letter to Powell. “It has become clear that I should aim to reduce my stress so that I can focus on my health issues.”
“Eric brought a relentless focus on how best to ensure the stability of the financial system,” Powell said. “My colleagues and I will miss him.”
Rosengren’s financial disclosures for 2020 revealed that he had engaged in stock trading last year even as the Fed cut its short-term interest rate to nearly zero and bought hundreds of billions of dollars in bonds to lower longer-term rates and spur the economy. He also invested in real estate funds that purchased mortgage-backed bonds of the same type the Fed itself was also purchasing.
And Dallas Fed president Robert Kaplan conducted multiple million-dollar trades last year in stocks such as Apple, Google and Facebook.
The investments by both Rosengren and Kaplan were permitted under the Fed’s rules, though they raised at least the appearance of conflicts of interest, which Fed policy discourages. Powell said at a news conference last week that the Fed will change its ethics rules, and suggested that one likely shift will be to bar Fed officials from owning financial assets that the Fed itself is also buying.
Kaplan is 64, but he doesn’t face mandatory retirement soon. That’s because Fed rules allow any bank president appointed after the age of 55 to serve up to 10 years before having to retire. Kaplan was appointed in 2015 at the age of 58, meaning he could serve until 2025.
The Boston Fed’s first vice president, Kenneth C. Montgomery, will take over as acting president and CEO. A new president will be chosen by the six members of the Boston Fed’s board of directors who are not bankers. Directors who are affiliated with banks are prohibited by law from participating. The search will be led by Christina Paxson, president of Brown University, and the new president will be subject to the approval of the Fed’s Board of Governors in Washington.
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