Yellen Shares Leak Probe Documents After Lawmakers' Demands

  • Fed agrees to let House staff review internal leak report
  • Lawmaker Duffy praises compliance, plans to query Yellen more

The Federal Reserve has provided the House Financial Services Committee with an internal report and some related documents surrounding the central bank’s probe of a leak of confidential information in 2012.

Fed Chair Janet Yellen said she will provide the House committee with “copies of the materials previously reviewed by committee staff at the Board,” including a report commissioned by then-Chairman Ben S. Bernanke, “and the documents underlying the report,” according to an Oct. 23 letter she wrote to Representative Sean Duffy, chair of the House panel’s subcommittee on oversight and investigations.

The disclosure is a win for the House panel that has been locked in a tussle on oversight with the Fed for several months.

“These materials contain highly confidential FOMC information as well as confidential personal information,” Yellen said in the letter to Duffy, referring to the policy-making Federal Open Market Committee. “We are providing you with these materials on a confidential basis.”

Cassie Smedile, a spokeswoman for Duffy, said the congressman appreciates the compliance and plans to ask Yellen further questions when she appears before the House committee Nov. 4.


Justice Probe

The Fed leak is under investigation by the central bank’s inspector general and the Justice Department. House Financial Services Committee Chairman Jeb Hensarling launched his own probe and subpoenaed the central bank in May seeking documents.

Fed officials have been reluctant to share the materials, saying it would risk compromising the probes.

Duffy challenged Yellen’s legal authority to withhold the documents with the committee at a July hearing, noting that Congress -- not the Fed inspector general -- has oversight over the central bank.

“We have the right to the documents, and you have the duty to provide them to us,” Duffy, a Republican from Wisconsin, told Yellen at the July 15 semiannual hearing on monetary policy. “You have no legal authority to deny that request. We are entitled to do oversight.”

House staff was able to review the documents at the Fed, according to her letter. In an Oct. 6 letter to Yellen, Duffy said he found several “procedural problems” with the Fed’s investigation.

Duffy’s Criticism

Investigators did not issue a “preservation order” for all e-mails and documents until more than 40 days after the investigation began, he said.

He also noted that the investigation was conducted by Fed employees, “many of whom had access to the leaked information,” Duffy said in the Oct. 6 letter. “This created an obvious conflict of interest because the investigators were also potential targets.”

In her response to Duffy, Yellen said the Fed recognizes the House’s oversight role.

Bernanke in October 2012 asked Fed General Counsel Scott Alvarez and FOMC Secretary William English to look into the sources of an Oct 3, 2012, Medley Global Advisors report on monetary policy.

The Medley report, titled “Fed December Bound,” telegraphed the possibility that $45 billion of U.S. Treasury purchases would be added to a quantitative easing program, as well as the possible adoption of guidelines on levels of unemployment and inflation that officials would seek to achieve before raising interest rates from near zero.

The Fed’s internal probe was never disclosed until it was reported by Bloomberg News, and the central bank has said subsequently it couldn’t find the source of the leak.

The Fed’s inspector general launched a separate probe of the leak that was inconclusive. Fed IG Mark Bialek revived the probe earlier this year, Bloomberg News previously reported.

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