This page has been archived and commenting is disabled.

Academic Study Shows Fed Engaged In Systematic Leaks To Insiders

Tyler Durden's picture




 

Submitted by Mark Melin via ValueWalk.com,

Researchers at Duke University and the University of California at Berkeley point to quantitative evidence that The Fed consistently leaks non-public information about its meetings, driving an investment pattern that has led to market gains.

Fed leaks 2

Pattern of Fed leaks and market gains established

The study, first reported by The Daily Californian, considers historical patterns in stock prices relative to the distribution of non-public Fed information. “The Fed uses ‘informal communication channels’ on even-numbered weeks after FOMC meetings,” the report said, pointing to leaks making it into media stories such as the Wall Street Journal as well as showing up in private financial advice.

To support their claims, researchers point to private advice received by financial investors and news reports that contained non-public information discussed in FOMC meetings. “The informal communication can steer market expectations by engaging with private forecasters and newsletters that influence market inference of current and future policy,” the report stated, citing the goal of managing market expectations. “Informal communication facilitates learning by the Fed from the financial sector about how the Fed’s assessment of the economy compares to that of the financial sector and about how markets are likely to react to a particular policy decision.”

“The data collection exercise was extensive, but it served our goal to understand how the Fed processes information internally and how it communicates with the public and the financial markets in particular,” researchers Vissing-Jorgensen, Duke University assistant professor, Anna Cieslak and UC Berkeley assistant professor Adair Morse were quoted as saying. The report specifically points to leaks by a variety of Fed officials, including then New York Fed Vice Chairman Timothy Geithner leading information about the Fed’s plans regarding the discount facility to then Bank of America CEO Ken Lewis.

Fed leaks 1

 

Fed insider trading investigation is the tip of a regular system of leaks where little concern for being prosecuted exists, report claims

The report dovetails a recent insider trading investigation of the Fed, which is mentioned in the report. The report authors pointed to a lack of concern regarding being investigated or prosecuted for the wide-spread if brazen leaks:

We provide a list of Fed leaks of the FOMC outcome (or key determinants thereof) or the FOMC minutes to private financial institutions, again being constrained in seeing only the leaks that emerge in the public domain. The most well-known example is the October 3, 2012 leak to Medley Global Advisors (MGA), a policy intelligence firm. It is clear from that document that Regina Schleiger, the MGA analyst, had a copy of the FOMC minutes from the September 2012 FOMC meeting, which were due to be released the day after her article. In addition, she provides a step-by-step account of the policy debate among FOMC members ahead of the September 2012 FOMC meeting, information that goes beyond the content of the minutes.

 

Two things are notable about this example beyond the leak itself. First, it is informative that the analyst wrote the newsletter without a concern for the legality of extracting and conveying inside information to those who could trade ahead of the minute release announcement. One possible interpretation of this is that leaks are commonplace and not prosecuted. Second, the subsequent investigations of the MGA leak offers evidence of the systematic nature of informal communication between the Fed and the financial sector.

In some respects, the lack of concern regarding legal consequences for its actions reflects a growing trend after 2008 where elite financial players didn’t believe their transgressions would be investigated much less prosecuted.

Such a breakdown of deterrence can have negative effects on society and may be unnecessary, the report observes. “While some informal communication is probably necessary in order for the Fed to learn from market participants, this is a fine balance since the Fed may be giving away very valuable information to particular investors in the private sector,” the researchers were quoted as saying, arguing that sanctioned, clear public communication is the appropriate substitute for informal behind the scenes communication to select insiders.

Read the full study below.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 12/03/2015 - 14:18 | 6871647 LawsofPhysics
LawsofPhysics's picture

Academics have always spent a lot of time and money "investigating" the obvious...

same as it ever was...

Thu, 12/03/2015 - 14:20 | 6871661 Neil Patrick Harris
Neil Patrick Harris's picture

The fed bankers are traitors. And treason is a capital crime...

Thu, 12/03/2015 - 14:34 | 6871748 knukles
knukles's picture

Systematic leaks.... No shit.
That's what happens with an organization vested with the power to coin money in secrecy....
Same as what happens to an organization vested with the power to spend unlimited money which oversees the organization vested with the power to coin money in secrecy

                                              No Shit

Thu, 12/03/2015 - 14:48 | 6871882 zibrus
zibrus's picture

Corrected: No Shit Sherlock

Thu, 12/03/2015 - 14:58 | 6871941 two hoots
two hoots's picture

 

This should not be dismissed as something expected or acknowledged but as potentially criminal.  If ample evidence exists justice should appoint a special prosecutor/staff.  Additionally congress should realize its failure to meet its constitutional responsibility concerning our money supply/value and make necessary changes.

 

Thu, 12/03/2015 - 15:02 | 6871975 r3ct1f13r
r3ct1f13r's picture

Congress does not realize, it spins.

Thu, 12/03/2015 - 15:30 | 6872174 SafelyGraze
SafelyGraze's picture

if you don't leak to insiders, why should you expect to keep your job?

hugs,
the insiders

 

Thu, 12/03/2015 - 15:09 | 6872019 undercover brother
undercover brother's picture

Firstly, the fed is supposed to be an independent entity and should not be soliciting opinions or information from the financial sector in determining their actions or the outcome of those actions.    Secondly, I can tell you with 100% certainty that absolutely nothing will come of this report.  Furthermore, I can also tell you with 100% certainty that even if every piece of raw data and evidence was handed on a silver platter to federal prosecuturs working with the SEC, that nothing will happen either.  Big banks and other big political donors are protected from prosecution by politicians.  The more you donate, the better your protection will be, which is why wall street gives to both sides of the isle with equal vigor.  

Thu, 12/03/2015 - 15:17 | 6872088 two hoots
two hoots's picture

The Federal Advisory Council (FAC), which is composed of twelve representatives of the banking industry, consults with and advises the Board on all matters within the Board's jurisdiction.  FOMC

Thu, 12/03/2015 - 15:19 | 6872103 undercover brother
undercover brother's picture

Correct, they are member banks.  but i'm not referring to them and I'm pretty sure the report wasn't either.   

Thu, 12/03/2015 - 15:22 | 6872126 GhostOfDiogenes
GhostOfDiogenes's picture

"Treason doth never prosper: what's the reason? Why if it prosper, none dare call it treason"

How many convictions for treason has the us had? In its history?

Hell, how many have there been since 1913?

Thu, 12/03/2015 - 14:26 | 6871694 KnuckleDragger-X
KnuckleDragger-X's picture

Anybody who knows how it was founded and who runs it has known this, academics are not part of reality and must study the shit of out of it in order to find out the obvious....

Thu, 12/03/2015 - 14:26 | 6871703 Skateboarder
Skateboarder's picture

It's considered a grand success if they find the obvious. Usually they can't manage to do that at all...

Thu, 12/03/2015 - 14:42 | 6871813 farmboy
farmboy's picture

Why are the battles in science so fierce ? Because really nothing is at stake.

Thu, 12/03/2015 - 14:52 | 6871910 LawsofPhysics
LawsofPhysics's picture

Sorry, I disagree.  It does depend on the "science".

eCONomics is a "social" science.

nothing at all like chemical engineering, for example.  Personally I am glad that our scientists developed nukes etc.

Thu, 12/03/2015 - 15:26 | 6872154 GhostOfDiogenes
GhostOfDiogenes's picture

Military nuclear weapons are science?

Really?

The science of destruction of foreign infrastructure, money sink, and total waste of resources for nothing gained?

Thats the best science you can come up with to benefit hunajity!?

Hell, I would rather waste time with the social scientists. At least they have something interesting to talk about.

Thu, 12/03/2015 - 16:20 | 6872434 LawsofPhysics
LawsofPhysics's picture

Guess what asshat?  All science and technology can be used for good or bad.

Touch a nerve did i?  How long have you had that "women's studies" degree?

Fuck right off!

Thu, 12/03/2015 - 16:15 | 6872412 farmboy
farmboy's picture

I take your point I was referring ofcourse to economics.

But you get bombarded with quant/math bullshit in economics, so either these highly educated people are delusional or either they are just mouthpieces. That is for sure.

Thu, 12/03/2015 - 14:44 | 6871831 TheBeatles
TheBeatles's picture

All 1oz Silver coins are €12 @ EurGold

 

https://www.eurgold.eu/silver/silver-coins/

Thu, 12/03/2015 - 15:18 | 6872091 SillySalesmanQu...
SillySalesmanQuestion's picture

The Magical Mystery Tour, is coming to take you away...coming to take you away, take you today.

Thu, 12/03/2015 - 15:09 | 6872021 venturen
venturen's picture

leak...Heck they are the biggest HEDGEFUND IN THE WORLD. The are trading their own book! Like the days when the crooked banks put a buy recommendation on a stock and then sell the hell out of it

Thu, 12/03/2015 - 15:23 | 6872112 overmedicatedun...
overmedicatedundersexed's picture

WOW, color me shocked. anyone reading ZH for any length of time and having 2 brain cells, have long known..Criminal fiat banksters and wall st and ol DC and the k street bagmen..organized crime can never be expected to be other than what it is. how about int rate fixing, pm fixing, cdo's ..corzine, hank paulson self dealing, well it would take too long to list it all..my favorite: Chris COX sec head 08, fell in a black hole, never to be seen again.

Thu, 12/03/2015 - 14:20 | 6871660 Bill of Rights
Bill of Rights's picture

Shocked, shocked to find gambling going on in here, sir your winnings!

Thu, 12/03/2015 - 14:23 | 6871665 RadioFlyer
RadioFlyer's picture

Due to advanced age, Mr. Yellen may have one or more issues with leaks.

 

Thu, 12/03/2015 - 14:22 | 6871674 Kaiser Sousa
Kaiser Sousa's picture

cant wait for this headline to be brought up on CNBS, Bloomberg, or Fox Business....

 

 

cant wait.

Thu, 12/03/2015 - 14:33 | 6871741 DirkDiggler11
DirkDiggler11's picture

Kaiser - the headline will show up along side of the headline admitting that Gold and Silver prices have actually been manipulated by the Fed as well.

I won't hold my breath either ..... Fucking Fed criminals should be swinging from lamp posts right now !!!!

Thu, 12/03/2015 - 15:02 | 6871972 taketheredpill
taketheredpill's picture

...crickets...

Thu, 12/03/2015 - 14:27 | 6871707 Clowns on Acid
Clowns on Acid's picture

Agreed LoP ... most people I know  knew this when wee Timmy Geithner was doling out insider Fed knowledge to transactors. Wee Timmy should be in jail. Eric Holder and all that....I know. 

Thu, 12/03/2015 - 14:38 | 6871771 jakesdad
jakesdad's picture

turns out holder's complete lack of action all those years was just a misunderstanding caused by an auto-correct gone awry from obama's blackberry:

 

bho:  "eric, getting a lot of heat on this - bank lives matter!!!"

eh:  "on it, sir!" 

Thu, 12/03/2015 - 14:31 | 6871728 VWAndy
VWAndy's picture

Wow it only took them 100 years to catch on.

Thu, 12/03/2015 - 14:32 | 6871734 gregga777
gregga777's picture

The Obama Administration routinely enforces the Law to punish political enemies and looks the other way to reward their friends. The Obama presidency is the most divisive, most corrupt, most Unconstitutional and most malignant in the entire history of the United States of America.

Thu, 12/03/2015 - 14:53 | 6871917 Seal
Seal's picture

Shaka Zulu admin

Thu, 12/03/2015 - 15:30 | 6872177 GhostOfDiogenes
GhostOfDiogenes's picture

"The Obama Administration routinely enforces the Law to punish political enemies and looks the other way to reward their friends. "

Bullshit!

Bush did it and so did Clinton. The left/right division in this country is childish and stupid, and solves nothing but division.

Thu, 12/03/2015 - 14:33 | 6871737 Itchy and Scratchy
Itchy and Scratchy's picture

Say it ain't so!

Thu, 12/03/2015 - 14:34 | 6871738 Insurrexion
Insurrexion's picture

 

 

Syed Rizwan Farook, 28, and Tashfeen Malik, 27 thought the Fed was in San Bernadino.

If they had been regular followers of ZH, they just might be alive today.

Message to the Fed: Dead men (and women) don't talk.

Thu, 12/03/2015 - 14:34 | 6871744 Comte d'herblay
Comte d'herblay's picture

My dad didn't believe me about the nutritional uplift one gets from daily doses of 500-1000 mg vitamin C.  Not for 20 yrs.  One day he called me up and said I was right about Vitamin C.  He had just 'learned' from Dan Rather that it's really good for you.  

Never misunderestimate the fact that the world believed the earth was flat 500 yrs after it was proven not, that Oswald acted alone, there is no connection between King, Bobby Kennedy, and Malcolm X, that the earth was the center of the universe, not the sun, and that gays can act in heterosexual roles successfully (Picture Neil Patrick Harris as a leading man lover of Sofia Vergara).

If one requires proof of everything to be certain of acting,  the only thing they can be sure of is perishing. 

Who here did not know that the FED---- mostly Jews, and ALL Jews and their henchmen ( like the latest appointed Neil Kashkari)  in the Chairman's role for nearly 40 years and counting ----has been being told by the likes of Blankfein, what to do?

The "leak" is ass backwards.  It is the Banks that are telling the FED what they, the banks WANT.  So in that sense there are no real leaks, just a Coincidence of Interests, which proves obscenely  profitable without risk for the Chosen.

 

 

Thu, 12/03/2015 - 15:32 | 6872198 GhostOfDiogenes
GhostOfDiogenes's picture

Jesus harold christ on a rubber crunch that was just crazy enough to make sense.

Thu, 12/03/2015 - 16:21 | 6872449 Depression is Coming
Depression is Coming's picture

So the sun is the center of the universe?

No proof needed, I believe you.

Thu, 12/03/2015 - 14:39 | 6871784 orangegeek
orangegeek's picture

Yellen is a treacherous cunt!!!  Die slowly you fucking pig!!!

Thu, 12/03/2015 - 14:39 | 6871786 firstdivision
firstdivision's picture

EMH bitches.  Carry on.

Thu, 12/03/2015 - 14:40 | 6871790 farmboy
farmboy's picture

To have a market impact information must be leaked to large markt parties like GS. Not for you and me :)

Thu, 12/03/2015 - 14:40 | 6871793 gregga777
gregga777's picture

The sole function of the Federal Reserve System is to transfer the wealth of the American People to Wall Street and international bankers. They have been phenomenally successful at doing so.

The Fed was enacted into law by corrupt political parasites who were in the pockets of the bankers and other interested parties. The Fed's power and secrecy has been easily and cheaply maintained by routine bribery of the corrupt political parasite class.

Thu, 12/03/2015 - 14:45 | 6871834 DontWorry
DontWorry's picture

Fuck you Yellen, you lying sack of shit.

Thu, 12/03/2015 - 14:46 | 6871862 Glass Seagull
Glass Seagull's picture

 

 

The Hebrews and their cycles.

 

Thu, 12/03/2015 - 14:47 | 6871865 Fuku Ben
Fuku Ben's picture

How long before Duke and UC Berkeley have Federal funds cut to tell them to STFU?

Or maybe they'll just ruin the researchers careers as a friendly warning to go back to studying something that doesn't disclose the ongoing fraud and collusion to the masses.

Thu, 12/03/2015 - 15:24 | 6872135 Mr. Schmilkies
Mr. Schmilkies's picture

I hope they don't own a nail gun.

Thu, 12/03/2015 - 14:50 | 6871898 yogibear
yogibear's picture

Yep, NY Fed William Dudley is always on the phone to Goldman and JPM. Letting them so they can front-run.

Thu, 12/03/2015 - 15:33 | 6872202 venturen
venturen's picture

front run...they trade THROUGH GOLDMAN AND JPM!

Thu, 12/03/2015 - 14:58 | 6871942 FrankieGoesToHo...
FrankieGoesToHollywood's picture

The whole point of not releasing the minutes immediately is to give them to the selected insiders before the public.  Why waste time on a study to prove exactly what was intended?  maybe is was an effectiveness check?

Thu, 12/03/2015 - 15:00 | 6871955 moonmac
moonmac's picture

Black Sox biggest cheaters in history! The Fed rigs markets, fixes interest rates and sets inflation expectations so their cronies always win! American Heroes!!!

Thu, 12/03/2015 - 15:05 | 6871992 PoasterToaster
PoasterToaster's picture

Leak?  Was there someone who thought the Fed was supposed to keep secrets from the other side of the plunder squad?

Thu, 12/03/2015 - 15:21 | 6872113 SharkBit
SharkBit's picture

Paper should be re-titled: I got the Jew Call and you didn't.

Thu, 12/03/2015 - 15:22 | 6872117 SillySalesmanQu...
SillySalesmanQuestion's picture

The FED leaks inside info to CONgress and just about everyone else....except for us peons.

Thu, 12/03/2015 - 15:29 | 6872168 Arnold
Arnold's picture

RICO

Thu, 12/03/2015 - 15:59 | 6872328 Pumpkin
Pumpkin's picture

This is the transparancy they promised.

Thu, 12/03/2015 - 16:06 | 6872370 carneades_jazz_hands
carneades_jazz_hands's picture

They get huge....YYYYUGE, sinecures upon retiring from the Fed.  It's not because they're nice people.

 

Thu, 12/03/2015 - 16:20 | 6872437 crazybob369
crazybob369's picture

And this is news why?

Thu, 12/03/2015 - 16:30 | 6872491 JamaicaJim
JamaicaJim's picture

The Rule of Law has come and gone.

 

Time to burn down the system. They cheat? We cheat. They lie? So do we.

FUCK THE GOVERNMEWNT, AND THE CUNTS AT THE FED...DIE YOU MOTHERFUCKERS

Thu, 12/03/2015 - 17:29 | 6872758 Dr. Bonzo
Dr. Bonzo's picture

Thank god the Justice Department and SEC are on the case..............................

Thu, 12/03/2015 - 18:45 | 6873028 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Three can keep a secret if two are dead. Even if I thought Janet gave a shit how full of leaks the Fed is, I don't know how she could stop Fed employees talking about work off the record to their pet MSM hacks---or at the very least their wives or mistresses (who might be bankers or MSM hacks themselves). 

Kudos to a Berkeley egghead for spending two years calculating an answer to three significant digits that anybody who lived on planet earth could have given them in thirty seconds.

Do NOT follow this link or you will be banned from the site!