Fed’s Rosengren announces September 30 retirement after trading scandal

Yahoo Finance's Brian Cheung, Julie Hyman, and Brian Sozzi discuss the retirement of Boston Fed leader Eric Rosengren and outlook for the Fed.

Video transcript

JULIE HYMAN: First, we go on to get back to the Fed. And you were just talking about what we are seeing in terms of Fed officials here this morning, Brian Cheung. And some surprising news this morning-- Eric Rosengren of the Boston Federal Reserve has announced his retirement.

Now, he was already set to retire because there is a mandatory retirement age at the Federal Reserve, I believe nine months from now. But he is announcing that retirement early. His stated reason is some health problems. But as you know-- you've been reporting on it-- there's some other stuff potentially, potentially-- you've got to be careful here-- going on behind the scenes.

BRIAN CHEUNG: Yeah, I was going to say it's a surprise maybe to people that haven't been following the Fed. But, obviously, in the wake of the revelations that we saw from their publicly disclosed financial holdings that the Boston Fed president was one of two Fed presidents that had a number of scrutinized transactions over the course of 2020. In the case of the Boston Fed president, a number of real estate investment trusts that he purchased in the depths of the pandemic. This was despite the fact that he was warning about the impact of the possible pandemic on real estate valuations.

But he's announcing this retirement not for that reason, but because of what he cites as a kidney condition that he says worsened during the pandemic. As you mentioned, because of the statutory rules around the way that Fed officials serve and the time that they serve in those positions, he was set to retire mandatory, on a mandatory basis next year in June. But he's pulling that forward to this week. September 30 will be his last day at the head of the Federal Reserve Bank of Boston. There was no mention of his real estate investment trust transactions in his resignation letter to the Federal Reserve Board, which was addressed to the Fed chairman, Jay Powell. Jay Powell offering a statement where he thanked the Boston Fed president for his service in that role, nearly 10 years or over 10 years in that role.

So again, it's interesting to see, because there's also the outstanding question of what's going to happen to the Dallas Fed president, Robert Kaplan, who there were disclosures in detailing his multimillion-dollar stock transactions, which also included an iShares floating bond rate ETF, which is also not great for the optics. But we'll see what happens to him his set resignation or rather his set retirement wasn't supposed to be anytime soon. So it remains to be seen if the Dallas Fed will want to pull that forward.

But, of course, this adding to all the noise. We've also heard from a number of other Fed presidents, just with regards to the monetary policy side of things. We'll see if that adds any noise, as the Chicago Fed president, for example, earlier this morning saying he could see that tapering happening soon. So a lot of noise in the Fed world. And we'll see if this complicates the messaging, especially that the Fed is trying to deliver here.

JULIE HYMAN: Hey, Brian, remind us, for the Fed heads out there, how many openings are there then with Rosengren stepping down? Who appoints the replacement regional Fed presidents? And so how does that potentially change the landscape?

BRIAN CHEUNG: Yeah, this is a really important question here. Obviously, there's going to be someone stepping up in an acting basis because this resignation is going to be effective this week. So the COO, the first vice president of the Boston Fed, who's Ken Montgomery, he's going to be stepping up in an acting role. But there will be a process to select a more permanent replacement for Rosengren. That's done by the Federal Reserve Bank of Boston's Board.

So this is not a search that's conducted by the Federal Reserve Board down in Washington DC, which is different from the Boston Fed's Board. So the Boston Fed's Board is kind of a group of regional businessmen and people who work in that region who will be able to select a person. So that process is usually a few months in duration.

So it'll be some time before we hear who the permanent replacement will be. But that selection process, ultimately when they do pick someone, does still have to be ratified by the board. That's usually just a pretty automatic process. But something that should be done in the months to come.

JULIE HYMAN: Yeah, something definitely to keep a watch out for, as we also watch Dallas to see what ends up happening there.