Former Federal Reserve Governor Adriana Kugler faced an internal ethics investigation and resigned abruptly in August after allegedly violating the central bank's trading rules, according to documents made public on Saturday.
Ethics Breach and Resignation Timeline
Adriana Kugler, who was appointed to the Fed by President Joe Biden in September 2023, announced her resignation on August 1, effective August 8 - nearly six months before her term was scheduled to end. The Federal Reserve initially described her absence from the crucial July policy meeting as due to a "personal matter," but newly released documents reveal a more complex situation.
During her final weeks at the central bank, Kugler attempted to resolve issues concerning her financial holdings. She requested a necessary waiver from Fed Chair Jerome Powell ahead of the central bank's policy meeting on July 29-30. However, Powell refused to grant the waiver, according to Bloomberg reports citing Fed officials.
Undisclosed Stock Trades Revealed
The Office of Government Ethics released Kugler's latest financial disclosures on Saturday, which uncovered previously unreported trades in several individual stocks during 2024. The documents indicate that some of these transactions occurred during the Fed's blackout period, directly violating the agency's strict ethics regulations.
The prohibited trades included stocks of Materialise NV, Southwest Airlines, Cava Group, Apple Inc., and Caterpillar - all transactions that are forbidden for Federal Reserve officials and their immediate family members during sensitive periods surrounding policy decisions.
Fed ethics officials had reported the issue to the agency's inspector general earlier this year. They subsequently chose not to certify the financial disclosures Kugler submitted approximately one month after her resignation. An inspector general spokesperson confirmed on Saturday that an investigation remains ongoing.
History of Ethics Violations
This marks the second time Kugler has faced allegations of violating the Fed's ethics rules. In disclosures filed last year, she admitted to breaching trading prohibitions when her husband executed several stock transactions without her knowledge, according to her statements at the time.
Following that earlier incident, the shares were sold and Kugler was considered to be in compliance with relevant laws and regulations. However, the latest revelations show continued problems with adherence to the Fed's strict financial conduct requirements.
Political Implications
Kugler's unexpected resignation provided former President Donald Trump with an earlier opportunity to fill a Fed board seat during his campaign, where he has been aggressively pushing policymakers to implement sharp interest rate cuts. The vacancy was ultimately filled by Trump adviser Stephen Miran, who took unpaid leave from his position as chair of the White House Council of Economic Advisers.
Miran has frequently advocated for rapid interest rate reductions, aligning with Trump's economic agenda. The timing of Kugler's departure and subsequent replacement has raised questions about the political implications surrounding Fed governance during a sensitive election period.
The Federal Reserve has implemented stricter ethics rules in recent years following previous trading scandals involving senior officials. These regulations are designed to prevent any appearance of conflicts of interest, particularly during blackout periods when Fed officials possess non-public information about upcoming monetary policy decisions.
