I once asked Janet Yellen a rather straightforward question that would echo for much longer than I expected.
It was March 2015, and the Federal Reserve was under pressure from Congress to reveal details about an internal investigation into how key details of its interest rate policy deliberations had made their way into a report by a private sector firm.
I was a reporter at the Wall Street Journal*, and I asked the following at a press conference:
Let’s make something clear: Like any journalist, I love a good leak. But this was not your typical leak of important information to a journalist who then reported it to the public.
This was the sharing of private, market-sensitive details with a private party — Medley Global Advisors — which then shared that information with its clients. The leak, it should be noted, happened all the way back in 2012 but it was still being discussed in 2015 because — despite the Fed’s internal investigation — nobody seemed to have gotten to the bottom of what had happened.
And back in 2012, any read on what the Federal Reserve might do to suppress interest rates as the US economy continued to crawl out of the Great Recession, could lead to huge profits for the traders who bet on such things. These days, traders are thinking about the next rate hike. Back then, interest rates were already at zero and the real insight gleaned from Medley’s report was how aggressively the Fed would work to keep them there by using its balance sheet.
My question to Yellen had to do with basic public trust in the Fed. Why should the American people believe the central bank is working in its best interests if policymakers chat privately with movers and shakers on Wall Street? This was an alarming trend I had been reporting on since 2010, when I co-authored a report for Reuters entitled “Cozying up to big investors at Club Fed.”
In it, my colleagues and I detailed other instances of market-moving information inappropriately being shared with investors, a trend we first observed when Fed officials speaking to bankers and hedge fund managers at conferences would suddenly go silent when a reporter walked by.
After the Yellen press conference, I took two weeks of paid leave for the birth of my daughter. When I returned, my editor at the paper told me I would no longer be attending Fed press conferences. No reason was given, and I left the job a few months later.
Market bloggers speculated the Fed had “banned” me from the press conference. I have no reason to think that was the case because the central bank let me back in as soon as I changed news organizations.
Fast-forward to April 4, 2017: Richmond Fed President Jeffrey Lacker resigns abruptly after admitting he was a source of the leak.
As soon as I saw the news, the whole press conference incident flashed before my eyes.
But Lacker’s admission that the Medley leak originated with him doesn’t entirely settle the matter.
We know Yellen also met with Medley herself. Why? What did she say to them? Former Fed economist and Treasury official Seth Carpenter was also under scrutiny on the issue. What were the results of the Fed’s own investigation? And of Congress’?
Also: Why did it take Lacker so long to come forward?
I’ll have to keep asking.
*I’m identified in that transcript as a reporter for Dow Jones Newswires, even though I was working for The Wall Street Journal, because both publications are part of the same company and, by tagging me as a Newswires reporter, Dow Jones could get more than one person in the room.