Kugler's Resignation Highlights Flaws in Fed's Ethics Oversight

The U.S. Federal Reserve is grappling with another ethics controversy as former Board of Governors member Adriana Kugler faced an internal probe for alleged violations of the central bank's financial trading rules before her abrupt resignation in August. The ethics investigation, revealed in a recent report by the Fed's Office of Government Ethics, highlights growing scrutiny of senior officials' compliance with strict ethical standards amid a broader political climate of heightened oversight.

Kugler's resignation came after the Fed's ethics office declined to certify her financial disclosures, which detailed transactions that appeared to breach internal rules. According to the report, Kugler's spouse had executed four stock purchases-Apple Inc. and Cava Group Inc.-without her knowledge. While Kugler emphasized that her spouse did not intend to violate any policies, the trades contravened the Fed's prohibition on individual stock purchases for senior officials and their families.

The ethics probe escalated when Kugler sought a waiver from Fed Chair Jerome Powell to address impermissible financial holdings, a request Powell denied. A Fed official confirmed that Kugler's resignation followed her inability to secure the waiver, which would have allowed her to rectify the violations. Her departure was abrupt and unexplained at the time, with the Fed citing a "personal matter" for her absence from a July policy meeting.

The Office of Government Ethics referred the matter to the Fed's independent Office of Inspector General (OIG) for further review. The OIG, which previously investigated Kugler for similar issues in 2024, is now tasked with determining whether her actions constituted a material breach of ethical guidelines. While the Fed's ethics office noted that Kugler's spouse acted without her knowledge, the broader implications for her tenure remain unclear.

Kugler's case adds to a series of high-profile ethics challenges at the Fed. Earlier this year, Atlanta Fed President Raphael Bostic resigned amid a trading scandal involving undisclosed financial transactions. Separately, President Donald Trump's controversial attempt to remove Fed Governor Lisa Cook over unrelated mortgage fraud allegations has also tested the central bank's independence. These incidents underscore persistent concerns about accountability and transparency at an institution long seen as a bastion of nonpartisan economic stewardship.

The Fed's inspector general has yet to release findings from its investigation into Kugler's conduct. In the interim, the central bank faces mounting pressure to reinforce its ethical safeguards and restore public confidence in its governance.