Just two weeks ago we pointed out the fact that The Fed had seemingly ignored Congressional demands for details with regard the 2012 FOMC Statement leak. Now we know why they missed the deadline:
- *YELLEN SAYS SHE MET WITH MEDLEY GLOBAL ANALYST IN JUNE 2012
- *YELLEN SAYS SHE DIDN'T GIVE MEDLEY CONFIDENTIAL INFORMATION
So she met with the analyst that leaked the statement... but didn't say anything?
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Some background...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.
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And now we know why they delayed (as Bloomberg adds),
Federal Reserve Chair Janet Yellen said on Monday that the U.S. Department of Justice has joined the investigation into a leak of confidential monetary-policy information in 2012.
“The Board’s Inspector General and the Department of Justice are in the midst of an investigation into this matter,” Yellen said in a letter to Representative Jeb Hensarling, chairman of the House Financial Service Committee.
“We are cooperating fully with them and look forward to the results of their investigation,” she said.
Yellen said she would also provide the names of Fed personnel who had contact with Medley Global Advisors, which published a report on deliberations of a September 2012 closed door meeting of the Federal Open Market Committee, one day before minutes of the meeting were made public.
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The Justice Department has opened a formal investigation into the FOMC leak (and we suspect sworn testimony coming).
Full letter below: