Richmond Fed head resigns, admits improper discussions

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Posted: Apr 04, 2017 6:37 PM
Richmond Fed head resigns, admits improper discussions

WASHINGTON (AP) — Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, announced Tuesday that he was resigning effective immediately after acknowledging improper discussions with a financial analyst that later became the subject of a lengthy investigation into leaks at the Fed.

In a statement, Lacker said that in October 2012 he spoke to an analyst at Medley Global Advisors who possessed "highly confidential" information about interest-rate decisions the Fed had considered at its September meeting. He said that after the analyst had introduced the information, he should have declined to comment, ended the call and reported to Fed officials that the analyst was in possession of confidential information.

Lacker called his conduct "inconsistent" with the Fed's confidentiality policies.

"I deeply regret the role that I may have played in confirming this confidential information and in its dissemination to Medley's subscribers," Lacker said.

Lacker's attorney Richard Cullen said that Lacker had been informed that the investigation into his role in the Fed leak had been completed and no charges would be brought against him.

The Fed's inspector general, Mark Bialek, said in a statement that his office was concluding its leak investigation.

A separate statement from the Fed board said the central bank was committed to maintaining the security of confidential information.

"We cooperated fully with the independent law enforcement investigation into an unauthorized disclosure in 2012," the Fed said. "We appreciate the diligent efforts made to bring this matter to a conclusion."

But the House Financial Services Committee said in a statement that they have not concluded their own investigation into the leak.

"The Financial Services Committee takes this matter very seriously and our investigation is ongoing, which is why we have no further comment at this time," said committee spokesman Jeff Emerson.

Lacker, who had already announced in January that he was planning to step down in October, said that he failed to disclose in a subsequent investigation in 2012 the full details of his conversation, specifically the fact that the analyst was in possession of confidential Fed information.

"The real problem for him is he didn't fess up to it. If it was just a mistake, you admit it," said Peter Henning, a law professor at Wayne State University in Detroit who wrote a book about public corruption. "Certainly it's a blow to the Fed's credibility."

The political fallout from the incident could be substantial, Henning suggested, providing more ammunition to the Fed's critics who say it can't be trusted.

Lacker said that when he was interviewed again in 2015 as part of investigations being conducted by the FBI, the Fed's inspector general and the U.S. Attorney's Office for the Southern District of New York, he did disclose that the analyst was in possession of confidential information.

"I have always strived to maintain the appropriate balance between transparency and confidentiality, but I regret that in this instance, I crossed the line to confirming information that should have remained confidential," Lacker said in his statement.

Members of Congress including House Financial Services Committee Chairman Jeb Hensarling, R-Texas, have been sharply critical of the Fed's handling of the 2012 leak. Hensarling specifically complained about the Fed's refusal to provide information about the investigation to his committee.

Fed Chair Janet Yellen in 2015 had told the committee that she was unable to provide some documents sought under a committee subpoena because doing so could jeopardize a criminal investigation by the Justice Department and an on-going investigation by the Fed's inspector general.

The leak episode "draws further negative attention to the Federal Reserve at a time when members of Congress are already sharply critical," said Mark Hamrick, senior economic analyst for Bankrate.com.

In a statement, the Richmond Fed said that it placed a "high priority on safeguarding information." It said that once the bank's board of directors learned of the outcome of the government investigations, it had taken appropriate actions.

The statement said the bank's search process for Lacker's successor would continue. In the interim, Mark Mullinix, the bank's first vice president, will serve as acting bank president.

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AP Business Writer Marcy Gordon contributed to this report.

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This story has been corrected to show that the information obtained by Medley Global Advisors covered the Fed's September 2012 meeting and not a later meeting.