"Above The Law" Fed Ignores Congressional Deadline On FOMC Minutes Leak Probe

Tyler Durden's picture

In a stunning shun to Congressional lawmakers, WSJ reports that The Fed has failed to comply with a request that the bank-owned entity identify the individuals who leaked The FOMC Minutes to Medley Global Advisors a day before the official release in October 2012. Rep. Jeb Hensarling sent a letter to Fed Chairwoman Janet Yellen on April 15 asking the Fed to name them by 5 p.m. EDT April 22. The deadline passed without any response by the Fed...

As a reminder, ProPublica explains the leak...

The Federal Reserve sprung a previously unreported leak in October 2012, when potentially market-moving information about highly confidential monetary deliberations made its way into a financial analyst's private newsletter.


The leak occurred the day before the scheduled public release of meeting minutes that shed new light on the Fed's decision to embark on a third round of bond buying to boost the economy, ProPublica has learned.




The newsletter containing the leaked material came from an economic policy intelligence firm called Medley Global Advisors whose clients include hedge funds, institutional investors and asset managers. On Oct. 3, 2012, Regina Schleiger, an analyst with the firm, sent clients a "special report" titled "Fed: December Bound."


The report focused on the Sept. 12-13 open market committee meeting, where the panel had approved what's called "QE3," a new program of large-scale purchases of mortgage-backed and Treasury securities.


Typically, the Fed chairman holds a news conference following the meetings to help explain the committee's actions. But when Bernanke did this on Sept. 13, he did not reveal the depth of disagreement within the committee about how effective the bond-buying program would be and whether it was worth the cost.


Schleiger wrote, however, that the minutes due out the next day would reveal "intense debate between Federal Open Market Committee participants."


Schleiger also revealed that the Fed would likely continue buying longer-term Treasury bonds beyond December. As part of a program dubbed Operation Twist, the Fed had been selling short-term Treasuries to buy longer-term ones.


Schleiger wrote that the committee would likely continue buying long-term bonds even after it sold all the shorter-term Treasuries. This information was not contained in the minutes and proved to be accurate.


Her newsletter also explained in uncommon detail both how Fed staff constructed the minutes and various policy options that were recommended and the thinking of the leadership – Bernanke and vice chairs Janet Yellen and Bill Dudley.


"It's not unusual for board staff to pull all-nighters working on the final draft of the policy recommendations, once these has [sic] been commented on," Schleiger wrote. "This one took until after midnight."

Which resulted in an internal probe ordered by Bernanke that inevitably found no wrongdoing.. and so Congress took up the matter.

But now, as The Wall Street Journal reports, The Fed has ignored that request...

The Federal Reserve has not replied to a lawmakers’ request that it identify the individuals who had contact with a private consulting firm that published a report on the central bank’s market-sensitive internal policy deliberations.


In October 2012, the day before the Fed released its minutes of its September 2012 policy meeting, Medley Global Advisors, sent a report to its clients with several sensitive details that subsequently appeared in the minutes. A central bank probe found  a “few” Fed staffers had contact with Medley before the report, but did not identify them.


Rep. Jeb Hensarling (R., Texas), Chairman of the House Financial Services Committee, sent a letter to Fed Chairwoman Janet Yellen on April 15 asking the Fed to name them by 5 p.m. EDT April 22.


The deadline passed without any response by the Fed, a committee spokesman said Wednesday.


The Fed declined to comment. Medley did not respond to a request for comment.

*  *  *

By way of conclusion, it appears  James Miller (of FreedomWorks.org) summed it up best, Fed Independence Is A Joke, So Why Not Audit?

A whistleblower-hating president, a bureaucrat who illegally targeted conservatives, and the former national intelligence director who lied before Congress walk into a bar.

The bartender says: what can I get “the most transparent administration in history”?

If Janet Yellen didn’t resemble a bookwormish teetotaler, perhaps she’d join her colleagues in a toast to suppressing democratic accountability. For now, she’ll order a club soda while working vigorously to keep Congress, and thus the people, out of her business of running the country’s central bank.

Yellen has only been Chair of the Federal Reserve for one year, but she’s already facing pressure to open the books from the new Congress. Leading the charge are two statesmen from Kentucky: Representative Thomas Massie and Senator Rand Paul. Both have introduced audit the Fed legislation in their respective chambers.

Wall Street’s cadre of financial oligarchs are predictably up in arms over an audit of their free money machine. Think tankers are antagonizing the campaign, with Jim Pethokoukis of the American Enterprise Institute asserting that Sen. Paul has “a poor understanding of what’s actually on the Fed balance sheet and how the bank operates.” It’s expected President Obama would veto an audit the Fed bill. Even local bankers are scaremongering over the prospect of the Fed losing autonomy.

Yellen, for her part, isn’t about to let the nosy wolves in her henhouse. In a recent interview, she said she would stand “forcefully” against any audit measures. She justified her intransigence by citing the importance of “central bank independence” and being able to act without interference.

Nothing says limited government and separation of powers like a bureaucracy unaccountable to the voice of the people! Then again, Yellen doesn’t care much for democratic oversight. She’s a caricature of Randian libertarianism: someone who wants to do whatever, whenever, without rulers. The problem is Yellen isn’t operating a private railroad company. She’s the figurehead for a government institution created by Congress. If democracy means anything, it’s that voters have some measure of control over political bureaucracies.

So apologies Janet, you don’t operate in a bubble (insert Fed pun here). The people - those plain people who think economics is about supply and demand rather than complicated math formulas - deserve some level of sway over the Fed’s operations. So why not an audit by the Government Accountability Office? Last I heard, President Obama was all about accountability.

Yellen and company aren’t buying it. They don’t want anyone butting in on their micromanagement of the money supply. Outside observers would interfere with the Fed’s independence, which is a sacrament of the central bank.

In an illuminating interview with the Wall Street Journal, David Wessel does his best to explain the history of the Federal Reserve and Congress’s long trek to make its internal deliberations more public. For over four decades, the GAO (then called the General Accountability Office) was barred from investigating the Fed. That changed in 1978, when Congress passed a law allowing the GAO to look at the central bank’s “regulatory duties.”

Then the financial crisis of 2008 hit, and the Fed intervened in the financial markets at an unprecedented scale. Banks and Wall Street firms were bailed out to the tune of tens of trillions of dollars. Main Street was left high and dry. Voters were livid and rightfully so.

Congress - after ignominiously bailing out the banks further - expanded the GAO’s authority to examine Fed loans to private companies. With the passage of the Dodd-Frank bill in 2010, the Fed was further opened up, and had to disclose “internal controls, policies on collateral, use of contractors and other activities.” Currently, the GAO is not allowed to review the Fed’s discussions on monetary-policy decisions.

Rand Paul’s audit the Federal Reserve bill eliminates that barrier. And therein lies to the problem according to Fed apologists. As Mr. Wessel tells us, the central bank should be protected from the influence of short-sighted politicians. “[G]iving politicians power over interest rates and the supply of credit hurts an economy over time,” he explains. “Prohibiting the GAO—an arm of Congress–from second-guessing the Fed’s monetary policy decisions is part of that insulation.”

Now, it is indeed true that politicians tend to be myopic in their actions. An $18 trillion debt created by the refusal to don big boy pants and cut spending is indicative of Congress’s systematic immaturity. Having the likes of Nancy Pelosi and John Boehner in charge of the Fed’s printing presses is a startling notion. But that’s not what auditing the Fed accomplishes. There is no language in either the House bill or Senate bill that puts Congress in charge of monetary operations. Fed proponents like Pethokoukis are demagoguing when they say otherwise.

It’s true the Fed’s financial statements are audited every year by the firm Deloitte & Touche. That perfunctory measure didn’t reveal the fact that the Fed took advantage of the financial crisis to bail out foreign companies and central banks. Over $16 trillion was doled out to foreign institutions like Barclays and UBS. The American public only became aware of the monetary shenanigans because Dodd-Frank contained a partial audit of the Fed’s activities. Had that not happened, we would still be in the dark.

Central bank defenders who scream “independence” over the prospect of an audit are misguided. The idea that political institutions operate in a vacuum and are isolated from outside interests is college-level idealism. It doesn’t pass the smell test. Government officials are primarily interested in perpetuating their power - public good be damned.

Janet Yellen is just as beholden to everyday politics as President Obama. She’s not independent; her job depends on the president’s approval. In a recent testimony before Congress, Yellen wondered aloud, “I really wonder whether or not the Volcker-led Fed would have had the courage to take the hard decisions necessary to bring down inflation and get that finally under control.” What she referred to was the economic calamity that preceded the inauguration of President Ronald Reagan. When the Gipper took office, inflation was raging. Volcker was appointed to the Fed to clamp down on rising prices. This wasn’t popular at first; hiking interest rates tanked the economy. But Reagan stood by Volker, giving him the political cover to follow through. As Washington Post columnist Robert Samuelson writes,

“[D]uring Volcker’s monetary onslaught, there were many congressional proposals, backed by members of both parties, to curb the Fed’s power, lower interest rates or fire Volcker. If Reagan had endorsed any of them, the Fed would have had to retreat.”

Volcker didn’t operate independently. He had the support of the Reagan White House. Just the same, Yellen isn’t free from democratic pressure. She has to obey political headwinds.

If the Fed is not immune from politics, then why keep up the facade of independence? Let’s acknowledge the central bank must answer to the political class. And then let’s look at the past: the Fed’s history is full of backroom deals for elite special interests. That’s not an accident. Darkness gives cover to all sorts of sleazy deeds. An audit would begin the process of weeding out this secrecy.

If the Federal Reserve has nothing to hide, it has nothing to fear, right?

*  *  *

Or perhaps this sums it up best... (when it comes to the untouchables)

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HelluvaEngineer's picture

Yep.  Total capture.  What do we do next?

wee-weed up's picture



Hell... Emperor Obozo shuns Congressional lawmakers everyday...

And then they, like a kicked dog, turn around and shun the people who elected them.

NotApplicable's picture


localsavage's picture

Maybe they can get Issa to run around and act mad and say that he is going to supena everyone.

palmereldritch's picture

They were just busy attending to other business....Not unlike this guy who's in the same line of work


jefferson32's picture

How can one say that Yellen is "a caricature of Randian libertarianism"?! How is a muppet PhD parasite who has never produced anything in its life ANYTHING like a randian hero? What is this bullshit?

Harlequin001's picture

Only once you've audited the Fed will you have sufficient evidence to jail them all.

The you can get to work on the BoE...

roadhazard's picture

Who the Prez is makes zero difference. Congress only needs "the People" for one day every two or four years.

NoDebt's picture

They won't release the name because it's probably somebody who wasn't supposed to be there in first place.  Steve Cohen, Jon Corzine, Joe "plugs" Biden, Warren Buffet, George Soros, Hillary Clinton.... take your pick.

Skateboarder's picture

The damn thing is not constitutional to begin with. Arguing about whether it broke laws of the political/legal system is a moot point, since it was introduced by the political/legal system in the first place...

max2205's picture

I heard the market is rigged.....

Ness.'s picture

No.  Not anymore.  I heard that got that dude.  Everything is now awesome again.  Stock were up today.

Thirst Mutilator's picture

Grandma Yellen IS the law! [Yenta, nominated by black homo POTUS whose policy decisions are made by jew bankers]


Break those glass ceilings & show 'em who's boss! ~ Meh...




All I can say is it's a good thing no straight, white, goy males have anything to do with these positions of power... Think what a mess we'd be in if that ever happened...

nmewn's picture

You're not really expecting anyone in the DC-NYC-Bawstawn corridor to respect any laws past or present are you? ;-)

Thirst Mutilator's picture



At this point, after everything I've witnessed over the past 2 decades, the only thing I'm 'expecting' is that ZH will turn into THE VIEW, and, by 2024, Ellen DeGeneres will be a presidential candidate...


'OW My Balls' ~ is already a reality...

nmewn's picture


With Bruth Jenner as vice?

Thirst Mutilator's picture

LOL ~ Pretty much...


Look ~ I'll say something right here & now... Way back when Bernanke was stepping down, and there was all this talk & speculation of who[m] the next FED CHAIR would be, the 'odds on' favorite was Larry Summers...


Notwithstanding the fact that he is simply a joke of a different color, I was very outspoken about saying that the nominee would be Yellen [who was being talked about, but not that much, & the handicapping, in that moment, was less than 10% for a Yellen nomination]...


So whatever ~ anyone can criticize me all they want simply because they don't like me, but I've had my finger on the pulse of these dynamics for quite sometime... It's all like a train wreck in ultra slow motion...

nmewn's picture

Well, its been going on for a while. Put forth a woman and whoever criticizes her POLICIES can be branded a chauvnist pig. Put forward a black and whoever critcizes him (or her) for their POLICIES can be branded a razzzist.

Its the latest, oldest political thing ;-)

Thirst Mutilator's picture

Don't forget the 'putter forthers' [who are a team effort between the financiers & MSM]...


&, of course, if you criticize that ~ you're anti-semitic...


& on a slow news day, there's always 'homophobia'...


& if you're guilty of ALL previously mentioned ~ you're a TERRORIST...

nmewn's picture

At this juncture I'm more than happy to allow the putter forthers to burn it to the ground to prove my overall point, they'll be first ;-)

Thirst Mutilator's picture

What? & ruin a perfectly functioning farm animal system?

Azannoth's picture

There is a saying in my neck of the woods, "Where the Devil can't, he sends in a woman" - queue Yellen, Hillary and Warren, the end-times are near(Disclaimer: I am not Christian or even religious)

Yen Cross's picture

  JFC, who missed the 3-4 hour ramp in $usdx last night from London, leading into existing home sales numbers?

 Who missed the last 3 RBA releases. Who missed the front running of the BOE yesterday?

 I'm amazed liquidity even fucking exists before major MACRO releases! SPOOF ME, and tell me how you're providing liquidity.

 What a fucking joke!

nmewn's picture

Legalized gangbangers, the whole lot.

OC Sure's picture

Televise the meetings to we the people live. 

NoDebt's picture

Hey, Congress.  How's it feel to be completely irrelevant?

We have three co-equal branches of government now, slightly different from the original three:  The executive, the central bank and police state.

Government needs you to pay taxes's picture

There must be some way outta here, said the joker to the thief

ebworthen's picture

J.P. Morgan Chase and the rest of the TBTF banks are above the law.

That why they got bailed out, and why the FED and Treasury facilitated it.

RaceToTheBottom's picture

It takes one to know one....

exartizo's picture

'As Mr. Wessel tells us, the central bank should be protected from the influence of short-sighted politicians. “[G]iving politicians power over interest rates and the supply of credit hurts an economy over time,” he explains. “Prohibiting the GAO—an arm of Congress–from second-guessing the Fed’s monetary policy decisions is part of that insulation.”'

What Bullshit.

THE FED has been the source of the destruction of the United States economy since 2008, NOT the politicians Mr. Wessel.

Pull your head out of your ass sir.

Fun Facts's picture

"give me control of a nations money and I care not who makes the laws"

M.A. Rothschild - House of the Red Shield Pawn Shop, Frankfurt Germany

Otrader's picture

" I'm the Law! " - Future Rothchild Inbreds

Seasmoke's picture

It was a Tribe member.

WeTheSheeplez's picture

Don't worry...President Camacho will fix everything...

williambanzai7's picture

I am sorry Old Yellen, any Indian basement trader, hedge fund manager or former Board member of Goldman Sachs can explain how prereleasing market sensitive information has nothing to do with the Fed's political independence (the latter being nothing but a stinking  a red herring as well).

Omega_Man's picture

off with their heads

philosophers bone's picture


Luckhasit's picture

as bad as that movie was, it is still pretty good even by todays standards, which is just terrible. in america, when you make the law, you are exempt from the law.

Wild Theories's picture

Karl Urban's version of Dredd(3d) is much better. Suggest you watch that version instead.

Stallone is just shit horrible.

Otrader's picture

The Stallone version was baaaad.  Karl Urban version was pretty good.  Thanks YifY Torrents!

fauxhammer's picture

Yellentl..a romantic comedy


CaptainMoonlight's picture

We need to wipe the Fed off the map.

Government needs you to pay taxes's picture

Rule of law is kaput.  Want justice?  Buy a gun.

sandman.s's picture

Fuckers don't even try to hide it anymore.  They've so successfully distracted the public, they don't have to.

bobdog54's picture

Has anyone or any entity complied with a Congressional request in the last several years? Guess who's running the asylum....

Trucker Glock's picture

Roger Clemens complied and they tried their best to fuck him.  His lawyer didn't tell him he would be better off to just ignore the fuckers.