Now we know.
Former Federal Reserve Governor Adriana Kugler abruptly resigned in August on a “personal matter” and returned to academia.
Her quick departure raised questions among economists and market watchers around the world.
Turns out she was facing an internal ethics investigation linked to alleged improper stock trades, according to a new government watchdog report.
And there’s more.
Fed Chair Jerome Powell refused to grant Kugler’s request for a waiver from the central bank’s beefed-up ethics rules, according to Bloomberg.
Kugler’s surprise resignation
Kugler, a Biden appointee, joined the central bank in September 2023.
Prior to that position, she served as the U.S. Executive Director of the World Bank.
Kugler raised eyebrows when she missed the Federal Open Market Committee’s July 29-30 policy meeting.
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She announced on Aug. 1 that she would resign effective Aug. 8, without citing a reason.
The Fed said then that her absence from the meeting was due to a “personal matter.”
The surprise resignation was a gift to President Donald Trump, who had been ratcheting up demands that the central bank drastically lower interest rates.
The Fed had been in a “wait-and-see” hold pending the impact of Trump’s tariffs and trade wars on inflation.
Trump appointed Stephen Miran, who took an unpaid leave of absence from his post as a White House economic adviser, to replace Kugler until Jan. 31.
Miran has voted repeatedly for rapid interest-rate cuts since joining the Fed in September.
Kugler requested an ethics waiver
Ahead of the July FOMC meeting, Kugler requested a waiver from Powell to conduct financial transactions, according to a Fed official.
Powell denied the request.
Related: Fed official sends strong signal on December interest-rate cut
It wasn’t immediately clear what that request involved, Bloomberg reported.
But according to the report from the U.S. Office of Government Ethics released Nov. 14, Kugler faced a probe by the Fed’s internal watchdog related to her recent financial disclosures before stepping down in August.
The report showed that Fed ethics officials declined to certify Kugler’s latest disclosures.
Kugler, a professor at McCourt School of Public Policy and Economics at Georgetown University, declined to comment.
Fed ethics probe referred Kugler to IG office
In the financial disclosure released Nov. 14, Fed ethics official Sean Croston said, “Consistent with our standard practices and policies, matters related to this disclosure were referred earlier this year by the Board’s Ethics Office to the independent Office of Inspector General for the Board of Governors of the Federal Reserve System.”
The financial disclosure, which was submitted roughly a month after Kugler’s departure, covered calendar years 2024 and 2025 through her resignation.
The newest disclosures revealed at least a dozen additional purchases or sales of individual stocks, also in 2024, with some of the sales and purchases occurring within weeks of each other, according to The Wall Street Journal.
Two of the forbidden stock transactions also occurred days ahead of FOMC meetings during the Fed’s so-called “black-out periods.”
Top Fed officials are required to submit disclosures annually and after leaving the central bank, and to report periodic financial transactions.
Kugler’s previous trading violations
In periodic financial disclosures during 2024, Kugler acknowledged that she had run afoul of Fed investment and trading rules when her husband completed four purchases of shares of Apple Inc. and Cava Group Inc.
Those trades violated the central bank’s rules that limit how senior Fed officials, their spouses and minor children invest and trade, including a general prohibition on the purchase of individual stocks.
Kugler said her spouse made the purchases without her knowledge.
The shares were later divested and Kugler was deemed in compliance with applicable laws and regulations by the Fed’s designated ethics official, according to the disclosures.
Powell tightened trading rules for Fed officials
Powell introduced tougher restrictions on investing and trading for policymakers and senior staff at the central bank in 2022.
The new rules, which the Fed said at the time were aimed at supporting the public’s confidence in the impartiality and integrity of policymakers, boosted financial disclosure requirements, among other measures.
They followed revelations of unusual trading activity during 2020 by several senior officials.
Boston Fed President Eric Rosengren and Dallas Fed chief Robert Kaplan each announced their early retirement after the revelations, with Rosengren citing ill health.
The Fed’s internal watchdog ultimately cleared the pair of legal wrongdoing, but chastised them for undermining public confidence in the central bank.
Related: Fed official warns inflation is still too high for more rate cuts
