In yet another blow to the Federal Reserve, Atlanta Federal Reserve President Raphael Bostic has been found to have violated the central bank's rules regarding financial disclosures and trading activity, according to the Fed's internal watchdog. This revelation adds to a series of ethics issues that have shaken the institution.

The findings, released by the Fed's independent inspector general, state that while there was no evidence of Bostic trading based on confidential information or acting upon conflicts of interest, his actions did run afoul of regulations meant to ensure Fed officials maintain a distance from any appearance of unlawful behavior. This is particularly important given their access to sensitive economic and financial information.

Specifically, investigators discovered that from March 2018 to March 2023, 154 trades were executed on Bostic's behalf during restricted periods known as "blackout" periods, when certain activities, including public speaking and specific forms of trading, are prohibited around Fed policy meetings. The report reveals that Bostic "knowingly engaged" in a trading strategy that allowed these trades to occur during those periods.

Notably, the trades in question were not directly directed by Bostic or his personal advisors but rather handled by third parties. However, this still constitutes a violation of broader regulations meant to maintain the integrity and ethical standards of the Federal Reserve.

The inspector general's investigation, initiated in October 2022 after Bostic admitted to breaking the rules himself, has now concluded with the release of the report. Any further action will be undertaken by the Fed Board and the Atlanta Fed. The Fed Board has confirmed that it is currently reviewing the findings.

Reacting to the inspector general's report, Claire Lewis Arnold, the board chair of the Atlanta Fed, expressed appreciation for the thorough review and assured that the board takes these issues seriously. A full board meeting will be convened to meticulously discuss the details outlined in the report.

The Federal Reserve has faced increased scrutiny over the ethical conduct of its officials in recent years. In 2017, Richmond Fed President Jeffrey Lacker resigned following his admission of involvement in leaking sensitive information to a financial analyst. Subsequently, in 2021 and 2022, revelations of significant trades made by two regional bank presidents and the Fed's vice chair prompted their respective resignations.

In an effort to regain public trust and strengthen ethics standards, Fed Chair Jerome H. Powell led an overhaul of the Fed's investment and trading rules. These revised regulations now prohibit the purchase of individual securities, impose restrictions on active trading, and require more timely reporting and public financial disclosures from Fed policymakers and senior staff.

As the review of Bostic's case continues, the Atlanta Fed and the Federal Reserve as a whole face the challenge of addressing the ethical lapses and reaffirming their commitment to maintaining the highest standards of conduct and integrity in their operations.