Jeffery Lacker, the president and CEO of the Federal Reserve Bank of Richmond and a member of the Federal Open Market Committee, abruptly announced his resignation on Tuesday, revealing himself as the source of a leak of confidential information that spurred investigations by the Department of Justice, the Office of the Inspector General of the Federal Reserve Board, the Federal Bureau of Investigation, the Commodity Futures Trading Commission, and others.
Lacker was already set to retire from the Richmond Fed in October, but said Tuesday that he is resigning immediately due to his role in the leak scandal, which stemmed from confidential information about the Fed’s plans to help support the country’s economic recovery being leaked to Medley Global Advisors in 2012.
Here’s some background on the scandal from the Wall Street Journal:
The leak probe centers on a confidential Sept. 12-13, 2012, meeting of senior Fed officials, when the Fed voted to begin a new effort to spur the economy by buying $40 billion worth of mortgage-backed securities each month. The Fed announced the move after the meetings concluded. It left open the possibility of further stimulus.
The important details of the Fed’s internal deliberations at the September meetings were supposed to be disclosed by the Fed in early October.
Before that happened, The Wall Street Journal published a story reporting that Fed officials at the September meeting were considering further action to stimulate the economy. The Sept. 28 story said there was a “strong possibility” the Fed would begin purchasing large amounts of Treasury bonds.
The next week, Medley sent a research note to its clients saying with more certainty that the Fed was “likely to vote as early as its December meeting” to begin monthly purchases of $45 billion worth of Treasury bonds.
The Oct. 3 Medley note, which came the day before the Fed released the meeting minutes, included confidential details that indicated the information came from inside the Fed.
As it turns out, Lacker was not only the source of the leak (or at least confirmed the veracity of previously leaked information), but also admitted to not being completely truthful with investigators’ probes about the leak.
On Tuesday, Lacker released a lengthy statement discussing his role in the leak and his actions with investigators.
Here is Lacker’s statement:
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. Although 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.
In response to Lacker’s announcement, the Richmond Fed released a statement of its own, suggesting that Lacker’s departure may not have been entirely voluntary.
“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,” the Richmond Fed said in its statement.
“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,” the statement continued.
“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,” the statement concluded. “This search process will continue as scheduled. In the interim, First Vice President Mark Mullinix is serving as the Bank’s acting president.”
Later Tuesday, the Federal Reserve issued a statement about Lacker's departure as well, stating that it cooperated with the investigation into the matter.
“The Federal Reserve is committed to maintaining the security of confidential FOMC information,” the Fed said in a statement. “We cooperated fully with the independent law enforcement investigation into an unauthorized disclosure in 2012. We appreciate the diligent efforts made to bring this matter to its conclusion.”
For much more on the investigation into the Medley leak, check out this report [both articles are behind soft paywalls] from the Wall Street Journal or this one from the New York Times.
[Update: This article is updated with a statement from the Federal Reserve.]
