New rules the Federal Reserve issued in October to clamp down on stock trading by board governors, regional presidents and senior staff seemed like a neat little bow to resolve a then-burgeoning scandal that, less than a month earlier, played a role in the resignation of leaders at the central bank’s Boston and Dallas satellites.

At least one analyst, at the time, heralded the quick turnaround. 

“At the pace that the government usually moves, this is breakneck speed,” Peter Conti-Brown, an associate professor at University of Pennsylvania, told Bloomberg.

Atlanta Fed President Raphael Bostic said then, in an interview with CNBC, that he was “hopeful that swift action will allow us to put this behind us and get us back focused on the job ahead.”

But comments last fall from think-tank personnel and other advocates may read prophetic at this point.

"This should be the beginning of a comprehensive investigation in what's going on at the board and the reserve banks, not the end,” Aaron Klein, a senior fellow for the Brookings Institution, told Reuters in October.

Dennis Kelleher, CEO of the financial watchdog group Better Markets, told The New York Times the Fed’s ban on buying individual stocks, holding investments in individual bonds or entering into derivatives should encompass “anyone at the Fed who is in possession of material nonpublic information.”

“New policies cannot be used to whitewash the prior bad judgment, failures of leadership, and violation of the Fed’s own policies if not the law,” Kelleher said.

Indeed, over the past four months, financial disclosures by Fed staff have deepened the scandal. An amended disclosure form uncovered that once-Fed Vice Chair Richard Clarida sold an exchange-traded fund in the run-up to the COVID-19 pandemic — then re-bought it three days later, just before the central bank signaled it might cut interest rates. Clarida resigned in January.

And Friday, The Wall Street Journal reported, disclosure forms unveiled that two Fed economists — both senior associate directors in research and statistics — reported trades during the same pivotal week as Clarida.

John Stevens, for example, made 46 financial trades on Feb. 27 and Feb. 28, 2020, that included buying and selling individual stocks, mutual funds and other investments, according to a disclosure form reviewed by the Journal. (Feb. 28 of that year marked the day Fed Chair Jerome Powell issued a statement signaling the central bank might cut interest rates.)

Diana Hancock, another Fed senior staffer, reported a Feb. 27, 2020, sale of more than $1 million in an exchange-traded fund, then a purchase of between $500,001 and $1 million of shares in the same fund less than three weeks later.

Both economists cited their spouses. Stevens, through a Fed spokesperson, said the transactions were almost entirely tied to a spouse’s inheritance, and that he didn’t direct the trade activity. He said he told his spouse’s financial adviser about Fed trading restrictions, and the holdings were “rebalanced” to comply with central bank rules. 

“Rebalancing,” of course, is how the Fed explained the transactions associated with Clarida’s amended disclosure.

Hancock, through the spokesperson, said her spouse made the trades in question on her form, adding she didn’t have any control over them.

The Fed did not respond to a question from The Wall Street Journal as to whether Stevens or Hancock had any direct meetings with Powell before his Feb. 28, 2020, statement. The rules the Fed announced in October have yet to take effect.

Allegations of influence

Friday's report is not even the first Fed ethics storyline to surface in the previous 48 hours. President Joe Biden's three nominees for vacant posts on the central bank's board of governors signed ethics pledges Wednesday indicating, if confirmed, they would “not ... seek employment or compensation” from any financial services company for four years after leaving the central bank.

The move may have been meant to counter an explosive allegation Sen. Cynthia Lummis, R-WY, leveled last week at Sarah Bloom Raskin, the nominee for Fed vice chair of supervision. Lummis asked Raskin, during her nomination hearing in front of the Senate Banking Committee, whether she used her standing as a former Fed governor — specifically, allegations that she called the Kansas City Fed asking it to reconsider fintech Reserve Trust's application to gain a master account with the central bank. The account allows the company to move money through the Fed’s payments system without needing a bank.

Raskin was on Reserve Trust's board of directors from 2017 to 2019. Reserve Trust's original request was denied but later granted — a reversal the Kansas City Fed attributed to a change in Reserve Trust's business model and a reinterpretation of state law by Colorado regulators.

Raskin submitted a written statement Wednesday, at the request of the Senate Banking Committee's ranking member, Sen. Pat Toomey, R-PA, indicating she did “not recall any communications I made to help Reserve Trust obtain a master account." 

“Had I done so, I would have abided by all applicable ethics rules in such communications,” Raskin wrote.

The pledge, however, appears to be insufficient for Toomey, who asserted in a letter Friday that Kansas City Fed President Esther George herself told him Raskin made the 2017 call directly to her.

"On the evening of February 2, 2022, you and your staff spoke with my staff," Toomey wrote to George in the letter, seen by CNBC. "On that you call, you revealed that Ms. Raskin had, in fact, personally called you about Reserve Trust's master account application after it had been denied.”

Dennis Gingold, a co-founder of Reserve Trust, disputed Toomey’s assertion in a statement Friday to Bloomberg. He said Raskin had “no role whatsoever” in appealing the Kansas City Fed’s rejection, adding that lawyers representing Reserve Trust and the state were the only participants.

Raskin’s “conduct was appropriate, ethical and correct in every respect,” Gingold told the wire service, adding that Republicans’ characterizations of sketchy behavior are “completely false.”

Ethics are not Toomey's only issue with Raskin. Even before last week's hearing, Toomey accused Raskin of "recently and repeatedly and expressly advocat[ing] that financial regulators generally, and the Fed in particular, allocate capital away from the fossil-fuel sector." 

Toomey has said climate-change policy falls within the purview of elected officials, not the Fed.

The Pennsylvania senator on Thursday continued his campaign for change within the central bank, saying Congress should consider consolidating regional Fed banks whose research touches issues like climate change and social justice, according to Bloomberg.

“One of the things that concerns me is in the absence of having a compelling monetary policy purpose, they seem to be wandering into other fields they like to play on but which have nothing to do with the Fed’s mission and purpose," Toomey said. "It is time for Congress to rethink their role."