WASHINGTON -- Federal Reserve banks have adopted a new code of conduct that prohibits employees from receiving free meals or other gifts from banks and securities firms that do business with the Fed, House Banking Committee Chairman Henry B. Gonzalez, D-Tex., said yesterday.

The revised code of conduct was adopted May 19 by the Federal Reserve Bank of New York and applies to all 12 Reserve banks, Fed Bank of New York President William McDonough told Gonzalez in a letter.

The new policy comes after complaints from Gonzalez that Fed officials were getting too cozy with the banks they regulate by getting treated to occasional meals in New York and elsewhere. New York Fed officials sometimes dine with members of the primary dealer firms to talk about bond market conditions.

The new rules require Fed bank officials to pay their share of costs for any business meals, and exceptions are likely to be "rare, if any," said McDonough.

Still, there are a couple of "limited exceptions" under the new policy. A meal that would otherwise be prohibited is allowed if the Fed employee is on bank business and payment is "not feasible," or if the employee is at "a widely attended conference or gathering" or a civic or charitable function.

The new code specifically prohibits Fed employees from accepting any gifts from the Treasury Borrowing Advisory Committee of the Public Securities Association. Fed officials meet with committee members before each Treasury debt refunding.

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