The Federal Reserve is supposed to set the rules, not break them. But the latest ethics report on former Fed Governor Adriana Kugler has once again exposed cracks inside one of the world’s most powerful financial institutions. The findings are blunt: she broke the rules, she traded when she shouldn’t have, and the oversight system that’s supposed to catch this either failed or looked the other way for too long.
This isn’t just another scandal. It’s a credibility problem at the heart of global monetary policy.
What Actually Happened
The U.S. Office of Government Ethics reviewed Kugler’s 2024 disclosures and found several violations:
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She or her spouse made over a dozen individual stock trades, even though senior Fed officials are banned from doing that.
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Some of those trades were made in blackout periods, the times around policy meetings when trading is explicitly forbidden because officials have access to sensitive information.
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Stocks traded included Apple, Southwest Airlines, Caterpillar, Cava Group, Fortinet, and others.
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A single Apple trade alone was worth somewhere between $100,000 and $250,000.
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Kugler tried to distance herself by saying many trades were done by her spouse, but the rules don’t care. Officials are responsible for the household’s trades.
The Fed’s ethics unit refused to certify her disclosure. That’s extremely rare and basically means: something is seriously wrong here.
When she tried to get a waiver, she was denied. One month later, she resigned.
Why This Matters to the Market
Central banks run on one thing: trust. When a Fed official trades stocks during blackout windows, it sends a very clear message to the public and investors:
“I know something you don’t.”
And that’s exactly how you destroy confidence in monetary policy.
People don’t need the perfect markets to believe the Fed is clean. They need to believe no one inside the Fed is using privileged information to get richer while regular investors wait for the next press conference.
This scandal also lands at the worst possible moment. Markets are already spiraling on rate-cut uncertainty, inflation worries, and political instability. The last thing anyone needed was another ethics failure inside the central bank.
What the Fed Did Next
Kugler quietly left the Fed in August 2025 and returned to academia. Her exit opened a seat for President Trump, who quickly moved to nominate his economic adviser, Stephen Miran.
So the scandal isn’t just about ethics. It reshapes the Fed’s power structure.
What Happens Now
This isn’t going to fade away. Expect three things:
1. More Scrutiny
Congress will almost certainly demand stronger and clearer restrictions on what Fed officials can hold or trade.
After previous scandals in 2021, the Fed vowed to clean things up. Clearly, that wasn’t enough.
2. Market Reactions
Investors hate uncertainty, and this kind of story forces them to wonder how much of Fed decision-making is happening behind closed doors.
3. Policy Impact
If the Fed tightens ethics rules again, some top economists may hesitate to join the central bank in the future. The risk of personal financial scrutiny may outweigh the prestige.
Bottom Line for Investors
No, this scandal won’t crash markets. But it absolutely hurts confidence in the world’s most important central bank. And when trust drops, volatility rises.
The takeaway is simple:
When the people who move markets start playing the market, everyone loses.