FOR almost five years inquiries have sought to establish how Medley Global Advisors, a research firm, revealed details of Federal Reserve minutes a day before they were publicly released in October 2012. On April 4th the saga took a sudden twist when Jeffrey Lacker, president of the Richmond Fed (and hence a member of the committee that sets interest rates), quit over the leak.
Mr Lacker spoke to Medley the day before it published its note, in which it revealed that there was “intense debate” within the Fed over the third stage of its quantitative-easing programme, that the central bank was poised to buy more Treasury bonds at a later date, and that the Fed had mulled a promise not to raise interest rates until unemployment fell below 6.5%. (Both the bond-buying and the promise did later happen.) According to Mr Lacker, who was the meeting’s sole dissenter, when Medley mentioned confidential information on the call he “did not refuse or express his inability to comment and the interview continued”. This, he said, “could have been taken…as an acknowledgment or confirmation of the information.”
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During an internal review into the leak in 2012 Mr Lacker kept mum about the fact that Medley had raised confidential information on the call. He revealed all only in 2015, during an investigation by external bodies including the FBI. His resignation comes six months before he was due to retire anyway. His lawyer told the New York Times that “no charges will be brought and the investigation as to him is complete.”
Because he ran a regional Fed, Mr Lacker’s exit does not add to the list of vacancies at the central bank which President Donald Trump has to fill. This includes one left by Daniel Tarullo, the de facto vice-chairman for bank supervision, who departed as planned on April 5th. Like all regional-bank presidents, Mr Lacker’s successor will be chosen by a board of directors, some of whom are appointed by private banks. (Campaigners have long said that this is one of several ways in which the Fed is too cosy with the financial industry.)
The affair has been an embarrassment for the central bank, which has puzzled over how to reconcile its desire to talk to market participants with the need not to reveal confidential information. In 2011 it issued guidance urging rate-setters to avoid conversations that might appear to give any firm an inside edge. This seems to suggest that Mr Lacker should not have been on the phone with Medley in the first place.