Are former Fed officials gaining access to secret information?
In its story about the problem of former Federal Reserve officials gaining access to secret market-moving information at the central bank, Reuters has found a really good solution:
Ben Bernanke should come out and give a press conference after each meeting of the Federal Open Markets Committee, which sets monetary policy.
The European Central Bank holds a press conference after its key meetings that gives its president, Jean-Claude Trichet, a chance to explain the reasoning behind its actions in a public forum.
"If Bernanke can't stop the leaks he ought to have a full press conference after the meeting. It's inappropriate for certain people to gain an advantage on information from the Fed," said Ernest Patrikis, a former No. 2 official at the Federal Reserve Bank of New York and now a partner at law firm White & Case.
The story notes how some former Fed officials, like former Fed governor Larry Meyer, are talking to people at the Fed about the confidential internal discussions leading up policy decisions. Then, Meyer and other former Fed officials (and other people who haven't worked at the central bank but are close to its officials) write notes to their clients summarizing what they found out. For this, they get paid millions.
Meyer and the Fed refused to talk to Reuters about the story.
But the situation is a bit more cloudy than it sounds. The Reuters story talks about how Meyer talked to folks at the Fed and summarized what he learned just nine days after one of the meetings. Official summaries aren't released for three weeks.
Reuters notes that five days after the Meyer memo, a Wall Street Journal reporter echoed many of the same ideas as did Meyer. Some reporters have access to Fed officials on the condition they can't be named. Fed officials talk to outsiders before making official pronouncements so they can brace the market.
In addition, it's hard to see how valuable the information gleaned would be. Sure, it can move markets, but in which way is often hard to know.
The Fed already is a pretty opaque place. As the setter of monetary policy and an important regulator, it needs to be careful not to let the perception that its former officials are looking to profit on their connections to the place, because that would raise big questions about what's motivating its current officials.
| October 4, 2010; 11:47 AM ET
Save & Share: Previous: Will regulators challenge questionable pension accounting?
Next: Market Cop heading back to the station
Posted by: Anonymous | October 4, 2010 2:08 PM | Report abuse
Posted by: Anonymous | October 4, 2010 2:41 PM | Report abuse
Posted by: Anonymous | October 4, 2010 3:29 PM | Report abuse
Posted by: Anonymous | October 7, 2010 9:23 AM | Report abuse
The comments to this entry are closed.