Is the Fed’s Ethics Framework Enough? Violations, Reforms, and the Fight for Credibility

The Federal Reserve’s publicly stated ethics regime is quite comprehensive, positioning itself as a gold standard for impartiality and conduct in government policy making. According to its “Ethics and Values” webpage, the Fed requires employees and policymakers to adhere to provisions in federal statutes/regulations, internal codes of conduct, and specific FOMC policies to guard against actual or perceived conflicts of interest. [1][2] Core values such as Integrity, Public Interest, and Independence of Views serve both normative and operational purposes. [1] The Strategic Plan 2024-27 codifies these values as guidance for internal culture. [2][10]

Recent events have exposed weaknesses. In 2024, Adranaa Kugler, then a Fed governor, was found to have made multiple individual stock trades—including Apple, Southwest Airlines, Caterpillar and Cava—during restricted blackout periods, violating the rules for covered individuals. [3][4] While she claimed some trades were executed by her spouse, the Fed’s ethics office refused to certify compliance, and referred the matter to the internal watchdog. She resigned in August 2025. [3][4][5]

Similarly, Atlanta Fed President Raphael Bostic was found by the Office of Inspector General to have made over 150 transactions via investment managers during blackout periods (March 2018–2023), failed to report accurate disclosure in annual filings, and held excess Treasury bonds in violation of Fed policy. Though there was no finding of illegal insider trading, his conduct ran counter to Fed ethics rules. [4][5]

These ethical breaches have sparked growing political attention: Sen. Tim Scott has called for stronger guardrails post-Kugler, citing eroded trust. [9] In the case of Lisa Cook, fraud accusations by the FHFA and a legal battle over her removal underscore how allegations—regardless of their merit—can be weaponized in service of political goals. [6][7] Political actors are increasingly willing to test the legal boundaries of Fed independence. The case Trump v. Cook, in which a court held that removal “for cause” requires specificity under the Federal Reserve Act, illustrates the independent judiciary’s role in upholding statutory protections. [6][8]

On the policy front, the Fed has acted: the FOMC in early 2024 expanded the definition of “covered individuals,” tightened investment/trading restrictions, imposed mandatory notifications and 45-day non-retractable notice for securities transactions, and instituted new compliance oversight (e.g. requiring sensitive staff to submit brokerage statements) to verify disclosures. [3][4] These changes, effective June 30, 2024, aim to preempt future violations. But enforcement mechanisms have been criticized as slow and insufficiently transparent. Cases like Bostic’s show that violations may be identified years later, and substantive consequences are rare—raising questions about deterrence. [4][5][9]

Strategic implications: The Fed’s legitimacy depends critically on consistent enforcement and visible consequences. Political figures are increasingly challenging its ethics framework, meaning weak or delayed responses risk undermining not just individual reputations but institutional independence. For market participants, any perceived compromise raises risk premiums around Fed decisions and may degrade trust in policy integrity. If Congress or the Courts force reforms (e.g. mandating appointment changes for the Fed’s IG, or specifying criteria for “cause” removal), the institution’s buffer against political influence could shift meaningfully.

Open questions remain: How will the Fed assure timely resolution of ethics investigations? What level of penalties are credible? Can internal oversight be strengthened without sacrificing speed or rigor? How will the Fed respond to attempts by political actors to weaponize ethics for strategic ends (e.g. removal attempts)? And finally, will the tightened policies adopted in 2024 sufficiently reduce future breaches—or are additional reforms needed?