Possible Fed Leaks Prompted Warning From Bernanke in 2012

By Kate Davidson Features Dow Jones Newswires

Former Federal Reserve Chairman Ben Bernanke told colleagues at an October 2012 policy meeting that the recent disclosure of sensitive Fed policy deliberations was "probably unintentional," but warned that such lapses could damage the central bank's credibility, according to meeting transcripts released Friday.

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The Fed leader's concerns followed the publication of two separate reports that appeared to reveal confidential information from the Fed's September policy meeting, a potential breach of its communications policies.

One of the reports, published by Medley Global Advisors, a policy information service, later sparked a criminal investigation and led to the resignation in 2017 of Richmond Fed President Jeffrey Lacker, who admitted to speaking with a Medley analyst the day before report was sent to clients.

Mr. Bernanke asked the Fed's inspector general and the secretary of its policy committee to investigate the Medley report, as well as a separate report in The Wall Street Journal. "Based on their findings, we will take further steps as indicated," he said, according to the transcript.

The Journal story, published in late September 2012, detailed how Mr. Bernanke formed a consensus among policy makers that summer to launch a third round of its bond-buying program, known as quantitative easing. The Medley report, published several days later, offered details about policy discussions likely to appear in the minutes of the September meeting, potentially market-moving information.

"My own sense is that the leaks were probably unintentional," Mr. Bernanke said at the start of the Oct. 23-24, 2012, meeting. "We have very good reporters talking to lots and lots of people. But that said, they are obviously damaging to the reputation and credibility of the committee, so I urge everybody, please, to be more careful in the future."

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Fed guidelines prohibit officials from discussing confidential information. Any breach must be reported to the central bank's rate-setting Federal Open Market Committee and could be referred to law enforcement by the Fed's inspector general.

The internal probe concluded that the Journal story was deeply reported and didn't constitute a leak, and that Fed officials who spoke with the Journal didn't provide details of Fed "policy proposals or actions." It also found that much of the information in the Medley report previously appeared in the Journal story.

After the internal probe became public in December 2014, however, federal prosecutors in the Southern District of New York, as well as the Commodity Futures Trading Commission, launched an investigation into the Medley report. Republicans in Congress also admonished the Fed for its handling of the possible leak of market-sensitive information, and subpoenaed the Fed for more details about the Medley probe.

In April 2017, Jeffrey Lacker, then president of the Richmond Fed, stepped down unexpectedly after revealing he had spoken with the Medley analyst the day before the report was published.

"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," he said in a statement at the time.

Mr. Lacker didn't face any criminal charges related to the investigation, and no charges were ever filed against anyone else. The inspector general closed its investigation of the matter last year.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

January 05, 2018 13:15 ET (18:15 GMT)