Two prominent Democrats demanded Thursday that the Federal Reserve release information about its probe into a leak during deliberations of its ultra-secretive rate-setting body. Their letter could further demands for more auditing of the central bank.
In a letter Thursday to the Fed General Counsel Scott G. Alvarez, Sen. Elizabeth Warren, D-Mass., and Rep. Elijah Cummings, D-Md., called for answers about a leak that occurred during a September 2012 meeting of the Federal Open Market Committee.
That body sets the Fed’s benchmark interest rate, which influences borrowing costs for consumers and businesses alike and affects the price and demand for stocks, bonds and other financial assets. Bloomberg News first reported last Dec. 1 that a Fed leak tipped traders about its stimulus efforts involving massive purchases of government bonds, an effort known as quantitative easing.
The investigative news group Pro-Publica reported weeks later that then-Fed Chairman Ben Bernanke ordered an internal probe into how details escaped from Fed deliberations, which are so private that a transcript of them is published on a three-year lag. The details were in a newsletter published by market intelligence firm Medley Global Advisors.
Bernanke, said Pro-Publica, was also concerned about leaks from that meeting that appeared in a Wall Street Journal story.
“Although the investigation reportedly ‘reached the highest levels of the central bank,’ the Federal Reserve did not acknowledge it publicly for over two years,” the two wrote to Alvarez, adding that “neither you nor any other Federal Reserve official has made public any information about the conduct of the investigation or its outcome.”
The Fed Thursday offered no initial details about the probes asserted in the lawmakers’ letter.
“We have received the letter and will respond to it,” said Fed Spokesman David Skidmore.
Written by two high-profile Democrats, the letter seeks a briefing on the matter before Feb. 15, and is potentially significant given the challenges on Capitol Hill the Fed already faced.
Republicans, including possible presidential candidate Sen. Rand Paul of Kentucky, have reintroduced legislation to require a complete audit of the Fed. This effort has gained steam in successive congresses, and with Republicans now in both control of both chambers, they could pass legislation that the independent Fed and White House find uncomfortable.
The Fed is already audited by an outside auditor, and subject to scrutiny from the Government Accountability Office. But the central bank has resisted efforts to have some of its lending decisions and its money policy deliberations subjected to an audit, suggesting that amounts to political interference.
The fact that market-moving information appears to have leaked out from the September 2012 meeting, however, potentially makes that argument weaker for Democrats who might have resisted audit efforts.
“We are disturbed by this lack of transparency regarding such an important topic,” wrote Warren and Cummings, respectively a liberal firebrand seen as a potential challenger for the 2016 presidential race and the top Democrat on a House of Representatives panel in charge of government oversight. “This leak contained key market-moving information, violated Federal Reserve policy on disclosure, and may have represented a violation of federal law.”
Comments