Politicsfederal reserveElizabeth WarrenOrrin Hatch

Federal Reserve Under Fire For Secret Leak Investigation

Federal Reserve Under Fire For Secret Leak Investigation
By 

Senior Reporter, HuffPost

and

Chief Financial and Regulatory Correspondent

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WASHINGTON, DC - FEBRUARY 25: Federal Reserve Board Chairwoman Janet Yellen listens to questions during a House Financial Services Committee hearing on Capitol Hill, February 25, 2015 in Washington, DC. The committee heard testimony from Chairwomen Yellen on the Federal Reserves monetary policy and the state of the US economy. (Photo by Mark Wilson/Getty Images)

WASHINGTON -- Senate Finance Committee Chairman Orrin Hatch (R-Utah) sent scathing letters to Federal Reserve Chair Janet Yellen and the central bank's top independent investigator on Wednesday, demanding information about a secret investigation into the leak of a major monetary policy decision.

The letters come one day after The Huffington Post reported that the Fed's inspector general didn't inform the public or Congress of its investigation.

"The notion that the Board and [the Federal Open Market Committee] can cloak any information that it pleases and shield it from transparency and accountability is unacceptable," the letters read.

In the fall of 2012, advance details surrounding a major Fed stimulus program were improperly released to a newsletter that serves wealthy investors. Medley Global Advisors' revelation of the central bank's plans ahead of schedule presented elite clients with an opportunity to cash in on the Fed's move before the broader markets could.

The Fed did not disclose that it had investigated the breach, and did not even acknowledge that the leak had occurred until ProPublica filed a Freedom of Information Act request over it. Bloomberg News also reported on the matter.

In the past, the Fed has responded aggressively to leaks of decisions by the FOMC, the panel that makes decisions about interest rates and inflation. Former Fed Chair Alan Greenspan asked the FBI to investigate one such leak in 1996.

This time around, however, the central bank assigned its top lawyer, Scott Alvarez, and FOMC Secretary William English to investigate. According to reports, their inquiry involved little more than a questionnaire sent to Fed staff who were involved in the September 2012 monetary policy decision.

On Tuesday, HuffPost reported that the Fed IG also spent at least a year investigating the breach without informing the public or mentioning the inquiry in its semi-annual reports to Congress. In his letter to Fed Inspector General Mark Bialek on Wednesday, Hatch said the IG's office had been "reluctant" to meet with Hatch's staff and demanded a "full briefing" on the leak and subsequent IG investigation. Hatch also asked for the same details from Yellen regarding the Alvarez-English inquiry.

There has been no public disclosure of anyone at the Fed being formally sanctioned for the breach. A source who was interviewed for the IG inquiry told HuffPost that the investigators had pulled phone and email records relating to the leak. Since relatively few Fed staffers and officials had access to the leaked information, the investigation likely could have been wrapped up within a few weeks.

Sen. Elizabeth Warren (D-Mass.) has been publicly critical of the Fed's leak-policing. She sent a letter to Alvarez in early February, and interrogated Yellen over the issue during a Senate Banking Committee hearing a few weeks later.

The Fed and the Fed IG declined to comment for this article.

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Before You Go

Politicians Take On Wall Street
Senator Sherrod Brown (D-Ohio)(01 of05)
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"Troubling reports suggest that it is back to business as usual at the Federal Reserve Bank of New York," Brown said at a Senate Banking Committee hearing in November after reports revealed that a current Goldman Sachs banker and a former New York Fed regulator obtained confidential information from the Federal Reserve. "It is no wonder that Wall Street always appears to stay one step ahead of the sheriff." (credit: Photo: Nov. 12, 2014. (AP Photo/J. Scott Applewhite))
Senator Elizabeth Warren (D-Mass.)(02 of05)
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"The over-representation of Wall Street banks in senior government positions sends a bad message. It tells people that one -- and only one -- point of view will dominate economic policymaking," Warren wrote in a November 2014 op-ed for The Huffington Post criticizing President Barack's Obama recent nomination of Antonio Weiss as Under Secretary for Domestic Finance at the Treasury Department."It tells people that whatever goes wrong in this economy, the Wall Street banks will be protected first. That's yet another advantage that Wall Street just doesn't need." (credit:Photo: Oct. 28, 2014. (AP Photo/Timothy D. Easley))
Senator Bernie Sanders (I-Vt.)(03 of05)
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"These people on Wall Street spent billions of dollars, billions of dollars, trying to deregulate Wall Street and they got their way. Five billion dollars in ten years is what was spent, and then they were able to merge investment banks with commercial banks, with insurance companies. They got everything they wanted. They said get the government off the backs of Wall Street. They got it. And the end result was that they plunged this country into the worst recession since the great depression." -- Bernie Sanders on the Senate floor, June 2012 (credit: (AP Photo/J. Scott Applewhite))
Senator Jack Reed (D-R.I.)(04 of05)
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“In order to protect taxpayers and investors, we need tougher anti-fraud laws and forceful oversight of Wall Street. Some of these institutions that are ‘too big to fail’ have also become ‘too big to care,'" Reed said in June 2012 while seeking support for legislation that imposed tougher penalties for Wall Street fraud. "If they look at the bottom line and see they can break the law, get caught, pay a nominal fine, and still profit, the cycle of misconduct will continue. The law needs to change to ensure the punishment fits the crime."Feb. 6, 2014. (AP Photo/Susan Walsh) (credit:ASSOCIATED PRESS)
Senator Elizabeth Warren (D-Mass.)(05 of05)
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Warren hammered Federal Reserve officials in September for failing to hold JP Morgan, Citi Group and Bank of America responsible for their role in the 2008 financial collapse.“The main reason we punish illegal behavior is for deterrence to make sure that the next banker who’s thinking about breaking the law remembers that the guy down the hall was hauled out in handcuffs when he did that," Warren said at a Senate Banking Committee hearing in September. "The message to every Wall Street banker is loud and clear: If you break the law, you are not going to jail, but you might end up with a bigger paycheck.” (credit:Oct. 28, 2014. (AP Photo/Timothy D. Easley))
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