The reputation of the Federal Reserve just took a huge hit. The President of Richmond’s Federal Reserve Bank for 13 years, Jeffrey Lacker, resigned right after he confessed to having shared confidential information with a financial firm in 2012. Since then, he’s been questioned by the law enforcement agencies of the country including the FBI.
“I crossed the line when I gave information that should have been confidential,” wrote Lacker in a statement. Lacker’s lawyer said that the investigation is complete at this moment. Furthermore, no charges will be made against Lacker.
Dallas Fed Bank’s former head, Richard Fisher, said he thinks the entire thing is sad and is a “tragedy.” Fisher has served alongside Lacker. According to him, he had never dreamed that Jeff Lacker would do the things he said he did.
The leak has occurred during the time the Fed took extraordinary steps in an attempt to revive the economy of the country after a terrible financial crisis. Each move that the Fed took was being watched all over the world, especially by investors who were trying to make a profit by finding out some of the specific actions that the Fed took.
In September 2012, the Richmond Federal Bank made the decision to put more cash into the economy. To do so, it bought bonds in order to boost growth. The policy is known as the quantitative easing three or QE 3. Lacker at the time was the only man on the board who did not vote for the QE 3.
Lacker claims that he spoke with a person at the economic advisory firm, Medley Global Advisors, in New York. This happened on October 2 which was two days before the meeting’s minutes were released for the public to see.
In a ProPublica investigation, the advisory firm sent reports to their clients which were mostly hedge funds. The reports contained details on what specific types of bonds were bought by the Fed. They were sent a day early before the minutes reached the public.
In the same statement that Lacker released through his lawyer, he wrote: “I regret the actions that I took. I also regret the role I’ve played with this confidential information leak as well as the dissemination of the information to the subscribers of Medley.”
Richmond’s Federal Reserve Bank is one of the branches of the Central Bank of America. Mark Mullinix, the Vice President, currently serves as the acting head of Richmond Federal. In a statement, the Federal Reserve clarified its commitment to maintain confidential information’s security. It said that the US Central Bank cooperated fully with all the investigations that have been conducted to the unauthorized disclosure of information in 2012.
Lacker’s leak definitely dragged the credibility of the Fed down. US President Donald Trump criticized the Fed repeatedly during his campaign. He called it more political than Hillary Clinton. Fed officials do all that they can to declare their independence from Wall Street and politics. This recent scandal is not helping their reputation at all.