Quantitative Easing

A Fed official who actively warned against real estate REITs

(Bloomberg) – One of the Federal Reserve’s biggest internal critics of US real estate risks was an active investor in the sector last year, according to financial reports.

Boston Fed Chairman Eric Rosengren listed stakes in four separate real estate investment trusts and disclosed multiple purchases and sales of those and other securities, the documents show.

Boston Fed spokeswoman Lucy Warsh confirmed that Rosengren’s trades were not conducted through a blind trust, but that “her investment decisions comply with the ethical rules and strict deadlines of the system.” .

Separate documents for Dallas Fed chief Robert Kaplan, a former executive at Goldman Sachs Group Inc., showed multiple deals over $ 1 million last year as the US economy was wracked by Covid -19. He also revealed a stake of over $ 1 million in the Kansas City Royals baseball team.

The U.S. central bank cut interest rates to zero in March as the pandemic spread and began buying hundreds of billions of dollars in treasury bills and mortgage-backed securities to calm financial markets.

Rosengren, who has raised concerns about commercial real estate in public speeches, also called for the Fed to consider cutting its purchases of MBS faster than Treasuries to avoid overheating the real estate market.

Rosengren’s 2020 disclosure shows that he bought and sold shares of Annaly Capital Management Inc., a REIT that holds agency mortgage-backed securities. The Fed buys $ 40 billion of this type of debt each month as part of its quantitative easing program. As a participant in the Federal Open Market Committee in 2020, Rosengren would participate in staff briefings on the state of this market. Rosengren is a voting member of the FOMC next year.

The Wall Street Journal first reported on Kaplan’s business activity, which included transactions worth more than $ 1 million in more than a dozen companies, including Delta Airlines Inc., Alphabet Inc.’s Google, and Verizon Communications Inc.

“All transactions were reviewed by the Dallas Fed’s General Counsel, who confirmed that the transactions complied with the bank’s code of conduct. No transactions were made during the Federal Reserve’s blackout period, during which business activity is prohibited, ”the Dallas Fed said in a statement.

The 12 regional Fed banks have provided 2020 financial information to their presidents. Most showed nothing unusual, with little to no transactions reported last year.

“We have very clear rules and restrictions on the activities – the financial activities – and we have full information on that,” New York Fed Chairman John Williams said Wednesday after a speech on the economy, although he declined to comment on whether these policies should be reviewed or changed.

(Updates with Annaly Capital MBS in seventh paragraph.)

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