WASHINGTON -- House Banking Committee Chairman Henry Gonzalez, D-Tex., yesterday urged the Securities and Exchange Commission to investigate allegations that former Federal Reserve governor Wayne Angell profited from inside knowledge when he went to work for Bear, Stearns & Co. Angell, who resigned from the Fed in February, told Bear Stearns clients in an April conference call that he believed most Fed district banks had requests pending to raise the discount rate. The Fed subsequently raised the discount rate to 3.50% from 3% on May 17.
An SEC spokesman, following standard practice, declined to confirm whether the agency is investigating the incident. However, Gonzalez revealed yesterday that the Fed's internal report on the matter by the office of inspector general was forwarded to the SEC.
"Now that the investigation has shifted to your office, I would appreciate the SEC investigating the concerns expressed in my letter," Gonzalez said in a July 6 letter to SEC Chairman Arthur Levitt Jr.
In a June 15 letter to the Fed's inspector general, Gonzalez cited reports that Angell told clients that eight or nine Fed district banks wanted to raise the discount rate -- information that is not normally made public.
Angell also reportedly told clients that he knew from a conversation he had in a weekend tennis match with a member of the Fed's board of governors that policymakers believed gold prices in the range of $320 to $340 an ounce were too high.
Last month Fed Chairman Alan Greenspan rejected a request from Gonzalez to require departing Fed employees to sign agreements prohibiting the release of market-sensitive information. Other federal banking agencies have no such requirement, and doing so would entail "legal and practical issues," Greenspan said.
The inspector general's report on Angell's activities has not been made public.
-- Stephen A. Davies