We can now close the case on who leaked that confidential, market-moving data to Medley global back in 2012: it was Richmond Fed's Jeffrey Lacker, who previously was expected to retire in October, and is resigning immediately.
In a statement, Lacker confirms he revealed confidential FOMC information to Medley Global and that he lied to the Fed's general counsel on at least two occasions. His full statement is below:
Statement Of Dr. Jeffrey Lacker
During the past 13 years it has been my privilege to serve as President of the Federal Reserve Bank of Richmond. It has also been an honor to contribute to the development of our nation's monetary policy as a member of the Federal Reserve's Federal Open Market Committee ("FOMC").
While transparency of the monetary policy process is important, equally important are the confidentiality policies that protect the internal deliberations of the FOMC and ensure the integrity of our financial markets. The Federal Reserve's confidentiality policies seek to guide participants in maintaining the balance between transparency and confidentiality. The FOMC has had in place for many years two specific policies relating to confidentiality. the FOMC Policy on External Communications of Committee Participants (the "External Communications Policy-) and the Program for Security of FOMC Information (the "Information Security Policy").
In 2012, my conduct was inconsistent with those important confidentiality policies. Specifically, on October 2, 2012, I spoke by phone with an analyst ("the Analyst") concerning the September 2012 meeting of the FOMC. The Analyst authors reports on Federal Reserve matters on behalf of Medley Global Advisors ("Medley'). Medley publishes macro-economic policy intelligence for institutions such as hedge funds and asset managers and is owned by the Financial Times Limited.
During that October 2, 2012 discussion, the Analyst introduced into the conversation an important non-public detail about one of the policy options considered by participants prior to the meeting. Due to the highly confidential and sensitive nature of this information, I should have declined to comment and perhaps have ended the phone call. Instead, I did not refuse or express my inability to comment and the interview continued. Additionally, after that phone call I did not, as required by the Information Security Policy, report to any FOMC personnel that the Analyst was in possession of confidential FOMC information. When Medley published a report by the Analyst the following day, October 3, 2012, it contained this important detail about one of the policy options and I realized that my failure to decline comment on the information could have been taken by the Analyst, in the context of the conversation, as an acknowledgment or confirmation of the information.
I deeply regret the role I may have played in confirming this confidential information and in its dissemination to Medley's subscribers. In this episode, as in all of my communications with analysts, journalists and the public, it was never my intention to reveal confidential information. I further acknowledge that through this and other conversations with the Analyst, I may have contravened the External Communications Policy, which prohibits providing any profit-making person or organization with a prestige advantage over its competitors.
Following these events, I was interviewed on December 10, 2012, as part of an internal review conducted by the General Counsel of the FOMC. In advance of that interview, on December 6, 2012, I provided written responses to a questionnaire issued by the General Counsel seeking, among other things, all relevant information regarding my communications with the Analyst. Althoug it was my intention to cooperate fully with the internal review, I regret that I did not disclose to the General Counsel, either in my December 6, 2012 questionnaire or the December 10, 2012 interview, that the Analyst was in possession of confidential information during my conversation with her on October 2,2012.
In 2015, I was interviewed again as part of a separate investigation conducted by the United States Attorney's Office for the Southern District of New York, the Office of the Inspector General of the Federal Reserve Board, the Federal Bureau of Investigation, and the U.S. Commodity Futures Trading Commission. In this subsequent 2015 interview with law enforcement officials, I did disclose that the Analyst was in possession of confidential information during my October 2. 2012 conversation with her.
I apologize to my colleagues and to the public I have been privileged to serve. I have always strived to maintain the appropriate balance between transparency and confidentiality, but I regret that in this instance I crossed the line to confirming information that should have remained confidential. I previously announced my intention to retire as President of the Federal Reserve Bank of Richmond in October 2017, and in light of these matters I have decided to make my departure from the Federal Reserve effective today.
The Richmond Fed made the following announcement moments ago, which suggests that Lacker did not leave voluntarily:
The Federal Reserve places a high priority on safeguarding information. We expect every employee to comply with all relevant policies and procedures, as well as our standards of conduct. Employees must review and acknowledge our policies annually. Once our Bank’s Board of Directors learned of the outcome of the government investigations, they took appropriate actions.
We are focused on moving forward within our organization—and were already underway with our presidential search, following Jeffrey Lacker’s announcement in January to retire in 2017. This search process will continue as scheduled. In the interim, First Vice President Mark Mullinix is serving as the Bank’s acting president.
This shocking event comes just hours after Chairman of the House Financial Services Committee Jeb Hensarling demanded that "American Households Should Demand a More Reliable Governance Structure for the Fed."
As CNBC's Steve Liesman adds, Lacker's resignation was the result of negotiations with law enforcement officials.
While that does not make it clear if Lacker will now not face criminal prosecution for leaking material information - recall the FBI has been probing the Fed's 2012 leak to Medley since 2015 - this is great news for Janet Yellen, who was personally close with Medley's Regina Schleiger, ther person at the center of the Fed leak scandal, as the Fed Chair is now off the hook.
Or maybe not: while Lacker has taken blame for the Medley leak from October 3, 2012, recall that the Fed was also investigating a second leak, involving a September 28, 2012 article in the WSJ by Jon Hilsenrath titled "How Bernanke Pulled the Fed His Way" in which Bernanke's planning to launch QE3 was described in great detail.
As the Fed revealed in a FOIA seeking information on the internal probes, the WSJ leak is ongoing:
One article was published in the Wall Street Journal (WSJ) on September 28, 2012, and appeared to disclose information about discussions of Committee participants around the June, August and September, 2012, FOMC meetings in apparent violation of the FOMC’s policies regarding security of FOMC information. In particular, this first article included:
- Descriptions of the non-public views of some participants that appeared to have been disclosed by other participants. (As described below, all participants are permitted to disclose their own views about monetary policy, but participants are not permitted under the FOMC’s policies to describe the views of another participant unless that participant has already expressed those views publicly.)
- The number of policy alternatives considered by the Committee at its September meeting.
- The roles of various participants in the policy development.
As for who will replace Lacker, Trump will surely have some thoughts on that, as Lacker's seat becomes a voting one in 2018.
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Update: No charges will be brought against Lacker.
Statement from Lacker's attorney, Richard Cullen of McGuire Woods: pic.twitter.com/R0uK028ZBa— Binyamin Appelbaum (@BCAppelbaum) April 4, 2017
No further comment, although maybe Ben Bernanke can blog about it one day.