Republican leaders of the House Financial Services Committee accused the Federal Reserve and its Inspector General of “willful obstruction” of a congressional investigation into a leak of confidential information on monetary policy.
The Republicans made the charge in a letter challenging the Fed’s non-compliance with their subpoena for documents last month. The letter, eight pages long with 33 footnotes, was signed by Representative Jeb Hensarling of Texas, chairman of the House panel, and Representative Sean Duffy of Wisconsin, the head of the panel’s oversight and investigations subcommittee.
The Fed’s Office of the Inspector General “has no cognizable legal grounds for refusing to produce the requested records,” the congressmen wrote. “The Fed’s refusal to comply with the committee’s subpoena constitutes willful obstruction of this committee’s lawful investigation.”
Fed spokeswoman Michelle Smith declined to comment, as did John Manibusan, a spokesman for the Fed’s inspector general office.
Fed Chair Janet Yellen told Hensarling, a Texas Republican, in a June 4 letter that she would only partially comply with a House document subpoena issued in May because “the Federal Reserve is mindful that we must not impede” an open “criminal investigation” by the Department of Justice. That probe is being handled by the U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation, Bloomberg News previously reported.
Hensarling and Duffy cited constitutional law and said the Fed’s alleged obstruction is also “now the subject of the committee’s investigation.”
The Fed IG’s “position is without legal basis and the Fed is mistaken to rely upon it,” they wrote in the letter. “The committee expects full and immediate compliance with its subpoena and investigative requests.”
The probes are focused on an Oct. 3, 2012, “special report” by Medley Global Advisors, a policy intelligence firm that sells information to hedge funds and other investors.
Released one day before minutes of the September 2012 FOMC meeting were published, the Medley report telegraphed that Fed officials were laying the groundwork to boost the third round of quantitative easing with purchases of U.S. Treasuries, and preparing forward guidance on the policy rate linked to inflation and employment conditions.
The FOMC took both those steps in December that year.
The Fed’s inspector general launched an independent investigation in March 2013. It concluded without reported results until it was re-opened this year after Bloomberg News first reported details about the leak and a separate internal probe ordered by former Chairman Ben S. Bernanke.
Separately, the Fed’s inspector general is reviewing the central bank’s procedures for handling economic releases. Three auditors from the inspector general’s office were observing today’s release under lockup conditions of economic forecasts and a policy statement from the Federal Open Market Committee, according to Manibusan.