Richmond Fed President Lacker resigns, admitting role in leak to analyst

The president of the Federal Reserve’s Richmond, Va., regional bank resigned Tuesday after acknowledging he had improperly discussed confidential monetary policy deliberations with a financial analyst and then initially failed to disclose his conversation during an internal leak review.

Jeffrey Lacker, who had been president of the bank since 2004, said he later revealed his conversations with the analyst from Medley Global Advisors when interviewed as part of an investigation by the Fed’s general counsel, the Commodity Futures Trading Commission, the FBI and the U.S. attorney’s office in Manhattan.

They were probing how Medley found out in 2012 about consideration by the Fed’s monetary policymaking committee of additional economic stimulus — information the central bank keeps secret to avoid investors profiting from it.

“I deeply regret the role I may have played in confirming this confidential information and in its dissemination to Medley’s subscribers,” Lacker said in a statement released by the McGuireWoods law firm in Richmond.

Lacker announced in January that he would retire on Oct. 1. But he said Tuesday he would step down immediately.

The bank, one of 12 regional Fed institutions, said that its board of directors “took appropriate actions” once it “learned of the outcomes of the government investigations.”

“The Federal Reserve places a high priority on safeguarding information,” the Richmond Fed said in a written statement.

The Fed’s Board of Governors in Washington said Tuesday that it was “committed to maintaining the security” of the confidential deliberations of the policymaking Federal Open Market Committee and had “cooperated fully with the independent law enforcement investigation into an unauthorized disclosure in 2012.”

Lacker’s attorney, Richard Cullen of McGuireWoods, said they have been told the investigation of Lacker has been completed and “no charges will be brought against him.”

Mark Bialek, the Fed’s Inspector General, said that his office was concluding its investigation into the 2012 leak.

Lacker is an alternate member of the Federal Open Market Committee this year, so his early departure will not affect interest rate decisions. He will be replaced on an interim basis by the bank’s first vice president, Mark Mullinix, while the board continues its search for a replacement.

Lacker’s resignation “draws further negative attention to the Federal Reserve at a time when members of Congress are already sharply critical" of the investigation and the Fed’s policies, said Mark Hamrick, senior economic analyst at Bankrate.com, a financial information website.

An October 2012 Medley newsletter reported to subscribers — including hedge funds and money managers — that the Fed was considering increasing the amount of bonds it was buying at the time to stimulate the economy. The newsletter appeared the day before the minutes of the September 2012 meeting were publicly released.

The leak was reported two years later by ProPublica, triggering an internal Fed investigation. Members of Congress from both parties have criticized the Fed for not doing a more thorough investigation, and a broader inquiry by outside officials is taking place.

Lacker said that when he spoke with the Medley analyst, whom he did not name, that person already had “an important non-public detail about one of the policy options” that had been considered a couple of weeks earlier by Lacker and other members of the Federal Open Market Committee at its September 2012 meeting.

He said Tuesday that he should have declined to comment or have ended the call, but did not and that “could have been taken by the analyst … as an acknowledgement or confirmation of the information.”

Lacker said that he failed to report to Fed officials that the analyst had confidential information, which he was required to do. He also said he failed to disclose his conversation with the analyst in a written questionnaire and interview with the Fed’s general counsel during the internal investigation in December 2012.

It wasn’t until a 2015 interview as part of the broader federal investigation that he disclosed the information, Lacker said.

“I have always strived to maintain the appropriate balance between transparency and confidentiality, but I regret in this instance I crossed the line in confirming information that should have remained confidential,” Lacker said.


UPDATES:

1:05 p.m.: This article was updated with statements from the Federal Reserve’s Board of Governors and the Fed’s Inspector General.

12:45 p.m.: This article was updated throughout with staff reporting.

This article originally was published at 11:05 a.m.

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