WASHINGTON — Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, suddenly resigned Tuesday after revealing that he inadvertently disclosed confidential information about monetary policy to analysts in 2012.
Although Lacker said in January that he intended to retire in October, his admission and immediate departure sent shock waves through the financial policy world.
“I apologize to my colleagues and to the public I have been privileged to serve,” he said in a statement. “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.”
At issue is a phone call with a Medley Global Advisors analyst in October 2012. During the call, the analyst discussed an “important non-public detail about” a monetary policy option being considered by the Federal Open Market Committee.
“Due to the highly confidential and sensitive nature of this information, I should have declined to comment and perhaps have ended the phone call,” Lacker wrote. “Instead, I did not refuse or express my inability to comment and the interview continued.”
Lacker said that he did not report to FOMC personnel that the analyst was in possession of confidential information. Medley later published a report by the analyst that revealed the FOMC’s deliberations. The Medley report related to the size and timing of the FOMC’s Treasury buying program and a target unemployment rate favored by then-Fed chairman Ben Bernanke.
“I realized my failure to decline comment on the information could have been taken by the analyst … as acknowledgment or confirmation of the information,” Lacker said. “I deeply regret the role I may have played in confirming this confidential information and in its dissemination to Medley’s subscribers.”
The publication of sensitive information sparked an investigation into the leak by the FOMC, the Justice Department and the FBI. Lacker said that while he intended to cooperate with the internal investigation, he did not disclose that the analyst possessed confidential information when questioned by the FOMC. He did, however, give his information to the FBI and the Justice Department.
In a statement, the Richmond Fed said that it "places a high priority on safeguarding information."
"Once our bank's board of directors learned of the outcome of the government investigations, they took appropriate actions," the Richmond Fed said.
The agency said it had already been a search for Lacker's successor in light of his planned retirment later this year.
The 2012 leak has been the subject of political wrangling between the Fed and Congress, with the latter using the leak as an example of the inadequacy of the Fed’s internal informational controls and ability to self-regulate the dissemination of market-moving information. House Financial Services Committee Chairman Jeb Hensarling, R-Tex., issued a subpoena to the Fed in 2015 seeking additional details about the leak, which FOMC participants might have been in contact with Medley and who might have been the source of the leak.
When Fed Chair Janet Yellen was revealed to have been among those in contact with Medley, lawmakers routinely broached the subject during her testimony before the committee. Rep. Sean Duffy, R-Wis., suggested that the Fed’s policy of referring leak inquiries to the Fed’s Inspector General could lead to conflicts if the leakers are in charge with policing investigations into their own behavior.
“It's fair to say that the general counsel who would make the recommendation for referral also is privy to sensitive information, which would mean that there could be a conflict of interest,” Duffy said. “The general counsel could actually be the leaker and he's also, or she's also, the one that's responsible for referring the matter to the" inspector general. "I think that this is ripe for some internal policy review at the Fed.”