After another rocky day for the Federal Reserve’s public image — brought upon the central bank by Jeffrey Lacker’s resignation over his role in revealing confidential information — the bank put out a circumspect, and wishful, statement.
As the statement ran only three sentences in length, let’s analyze each independently.
• “The Federal Reserve is committed to maintaining the security of confidential FOMC information.” By “committed,” you might say, the central bank means it’s trying. It has introduced new procedures for officials and reporters alike to guard against the early release of information. It still hasn’t prevented more mess-ups — like the premature release last September of industrial production data — but there’s effort there.
• “We cooperated fully with the independent law enforcement investigation into an unauthorized disclosure in 2012.” The Fed really wasn’t that helpful in the congressional investigation into the unauthorized leaks, if the comments of Rep. Jeb Hensarling are to be believed. The Texan blasted Federal Reserve Chairwoman Janet Yellen in public about the issue. But notice that the Fed specifically refers to the “independent law-enforcement investigation,” which refers to an insider-trading probe. Seeing as how there’s no indication the Department of Justice or the FBI was unhappy with the Fed, we’ll rate this comment as true, if a bit lacking in context.
• “We appreciate the diligent efforts made to bring this matter to its conclusion.” LOL. “Conclusion”? What conclusion?
Yes, Lacker is out of a job, on some combination of his own volition and those of law enforcement (per a comment from his lawyer) and the Richmond Fed board (per a comment from the regional bank).
Also read: Why Lacker case is unusual — a leaker actually resigned
But there are still so many questions.
The first: Why now? Why did Lacker resign on Tuesday?
Recall that in 2012, Lacker did not confess to the call with Medley Global Advisors after being asked by the Fed’s top lawyer, and in 2015 — facing higher stakes for perjury — he did to the Justice Department, the FBI, the Commodity Futures Trading Commission and the Office of the Inspector General of the Federal Reserve investigators. That means for more than a year the federal government knew there was a leaky Fed official — who continued not just to sit in his influential post but to participate in key decisions.
Maybe the FBI and the Justice Department thought Lacker had been scared straight and would not disclose further confidential information. It’s unclear whether anyone — including the Fed’s own inspector general — thought to bring the matter before Lacker’s colleagues, and crucially, Yellen.
According to the Richmond Fed statement, when the regional bank learned “of the outcome of the government investigations” the board of directors then took “appropriate actions.”
Another other key question was whether Lacker was “the” source or just “a” source of the Medley report. In Lacker’s account, the Medley reporter — or analyst, to use Lacker’s terminology — “introduced into the conversation an important non-public detail about one of the policy options considered by participants prior to the meeting.”
So, a lucky guess? Did Medley’s Regina Schleiger “rambo,” as it’s sometimes called, her way into getting a story by obtaining a confirmation of what she thought may have been the case, or did she already have a source? It’s already known the Senate Finance Committee looked into whether a former Fed official who was nominated to a Treasury position, Seth Carpenter, was involved; Carpenter has denied that. Yellen herself has admitted she’s talked to Medley but has denied involvement.
That the investigation has been concluded, as the Fed’s inspector general said Tuesday, suggests the federal government’s curiosity has been satiated. Lacker’s lawyer announced his client won’t be charged. That satedness could reflect that an additional leaker, if there is one, no longer works at the Fed, either.
Also, there’s the issue of Lacker’s behavior in 2012. Faced both with a written questionnaire and then an actual conversation, Lacker didn’t own up to his behavior to general counsel Scott Alvarez.
Alvarez’s importance to the Fed has been built up to mythical proportions, so much so that Sen. Elizabeth Warren spent part of a hearing blasting him in front of Yellen. But clearly, Lacker didn’t think enough of Alvarez to be truthful to him. Alvarez has already announced plans to retire, but this episode has to raise a question of whether others at the Fed were similarly cavalier in the information they chose to give or not give the central bank’s top lawyer.
Finally, there’s the question of how Lacker’s resignation will play into broader efforts to tame the central bank. The mix of power between the Fed’s board of governors in Washington and the regional Fed presidents has long been a source of dissension. And even among the regional presidents, Lacker wasn’t a key Yellen ally — at all, really — the way New York Fed President William Dudley or San Francisco Fed President John Williams is.
Of course, there’s reality, and there’s perception. Republicans looking to “audit the Fed” might not care that Lacker was closely aligned with their views to use his resignation as another bullet against the institution.