Regional Fed chiefs step down after criticism over personal trades

New York(CNN Business) The heads of the Boston and Dallas Federal Reserve banks announced they would be retiring early amid backlash over personal investing decisions that raised conflict-of-interest concerns.

Eric Rosengren, the Boston Fed chief, cited health concerns Monday in announcing he would step down about a year earlier than planned. He was set to retire in June next year but moved that date up to this Thursday.

In a message to staff, he shared that he has a kidney condition and qualified for transplant last year. Making lifestyle changes now will delay the need for dialysis, according to the statement.

Later Monday, Dallas Fed chief Robert Kaplan followed suit, saying in a statement that his retirement would take effect October 8.

"The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve's execution of that vital work. For that reason, I have decided to retire as President and CEO of the Federal Reserve Bank of Dallas," Kaplan said in the statement.

The Fed officials have been under scrutiny over personal trades during the pandemic while the central bank was buying billions of dollars in assets every month to shore up financial markets.

On Tuesday, Fed Chairman Jerome Powell said during his testimony before the Senate Banking Committee that the central bank should look at officials' past trading activity.

"It's really not working now," Powell said of the Fed's rules. "We understand that. We need to modify our practices."

Lobbying group Better Markets called for both bank chiefs' resignation or removal over their trading activity. The group called Rosengren's early retirement "too little, too late" in a tweet Monday morning.

The Boston Fed recently disclosed that Rosengren had investments and trades in the real estate industry. At the same time, the central bank was buying $40 billion worth of mortgage-backed securities each month to support the US economy during the pandemic.

"This is clearly an issue that's being reviewed," said New York Fed President John Williams during an interview at the Economic Club of New York on Monday. "We need to have the public's trust."

Fed Chairman Jerome Powell faced questions about the trading scandal during last week's press conference following the monetary policy update. But his responses weren't satisfactory according to Better Markets.

"That stonewalling sends a terrible and demoralizing message to the staff of the Fed, while undermining its credibility with the biggest Wall Street banks the Fed is supposed to supervise and regulate," said the group's co-founder and CEO Dennis Kelleher last week.

--CNN's Matt Egan contributed to this report.