By Pedro Nicolaci da Costa
U.S. lawmakers want additional answers from the Federal Reserve
about published reports on the details of market-sensitive policy
deliberations in 2012.
Some members of Congress have indicated in recent days they are
unsatisfied with a March 23 Fed memo summarizing its internal probe
of the matter, which found no major breaches of communication.
Sen. Orrin Hatch (R., Utah), chairman of the Senate Finance
Committee, "found the Fed's memo to be short on detail and believes
that this is an issue that deserves to be further scrutinized,"
said Julia Lawless, a spokesperson for the committee. "If
information was in fact leaked, it puts the integrity of the market
for Treasury securities at serious risk."
The Fed review focused on a Sept. 28, 2012 Wall Street Journal
article and on a report a few days later from Medley Global
Advisors, a private consulting firm, to its clients.
The Journal article provided a detailed account of how then-Fed
Chairman Ben Bernanke had worked for months to build consensus
among skeptical colleagues to approve a controversial new round of
Fed bond purchases at their policy meeting on Sept. 13, 2012. The
Fed review recently found "that, before publishing the Journal
article, its author had talked, in some cases multiple times, with
every reserve bank president and most members of the board of
governors," the Fed said in a release.
The Fed added that the author had "also spoken to a number of
staff members" to obtain information. "These disclosures appeared
to be unintentional or careless, and none of the disclosures
involved details of [Fed] policy proposals or actions," it
said.
The Medley report had included details of the September 2012 Fed
meeting ahead of the central bank's Oct. 4, 2012, release of
minutes summarizing the session, and said the Fed was on course to
take certain important actions at its December policy meeting. The
Medley report was posted online by the news organization
ProPublica.
The Fed found "nearly all of the information" in the Medley
report had "appeared previously" in the Journal story, and "only a
few" central bank personnel reported having contact with the Medley
author. Yet the Fed also said its inspector general "was
investigating the apparent leaks reflected in the" Medley
report.
Sen. Elizabeth Warren (D., Mass.) and Rep. Elijah Cummings (D.,
Md.) on Tuesday vowed to keep pressing the Fed on its probe.
"Senator Warren will continue to work with the Federal Reserve
and the [Fed's] inspector general to determine how the leak
happened, whether the investigation was conducted appropriately,
and whether the Fed has taken the appropriate actions needed to
ensure that these kinds of leaks don't happen again," said Lacey
Rose, a spokesperson for the senator.
Mr. Cummings said in a statement, "Senator Warren and I will
continue to work with the Federal Reserve to resolve the
outstanding questions related to the 2012 leak, including how and
why a Fed employee leaked market-moving information, whether the
Fed responded appropriately to this serious situation, and how best
to ensure the confidentiality of discussions among monetary policy
makers is preserved in the future."
The Fed and Medley declined to comment. Gerard Baker, editor in
chief of the Journal, said in a statement, "The Fed conducted a
thorough review and concluded that our reporter, Jon Hilsenrath,
went to extraordinary lengths to get the story right, including, as
the report detailed, connecting with most members of the board of
governors and every bank president multiple times.' As always, I'm
immensely proud of Jon's dedication to rigorous and accurate
reporting."
The Fed report didn't address some details in the Medley report
that didn't appear in the Journal story, although lawmakers had
asked about them in recent weeks.
The Medley report, for example, said the minutes of the
September meeting would show the Fed was on track to expand its
bond-buying program in December, which it subsequently did. They'd
reveal "the groundwork for further action in coming months has been
laid and that labor market improvement is unlikely to be
substantial enough to stave off new Treasury purchases into 2013,"
wrote Medley analyst Regina Schleiger.
She said the Fed was likely "as early as the December meeting'
to end one bond-buying program on schedule and "replace it with
monthly Treasury purchases of around $45 billion." The Fed did
exactly that in December.
Mr. Hatch, in a March 11 letter to the Fed, asked for more
information about these points in the Medley report.
"The analyst's report provided details of what the unreleased
minutes of the [Fed] meeting would say, information about the menu
of policy options and possible actions that were presented to the
[Fed] meeting, and information suggestive of a leak from Federal
Reserve staff to the analyst," Mr. Hatch said.
The Fed influences interest rates in the world's largest
economy, and its decisions can cause huge swings in global
financial markets. Confidential information about its internal
deliberations or advance information about the minutes of its
meetings or possible future actions can be worth huge sums of money
to traders around the world.
The Fed's official conduct policy states that meeting
"participants have agreed to refrain from describing their personal
views about monetary policy in any meeting or conversation with any
individual, firm, or organization who could profit financially from
acquiring that information unless those views have already been
expressed in their public communications."
Write to Pedro Nicolaci da Costa at pedro.dacosta@wsj.com