A rare scandal at the Federal Reserve broke in the press on Tuesday. The Richmond, Virginia Fed president resigned over passing confidential information to an investment group.
Oy vey! And you thought Jewish bankers got rich by being honest?
Richmond Federal Reserve President Jeffrey Lacker announced his immediate resignation Tuesday, admitting that he discussed sensitive information with an analyst regarding the Fed’s plans for economic stimulus.
Lacker, 61, became president and CEO of the Federal Reserve Bank of Richmond on Aug. 1, 2004. He is a member of the policy-setting Federal Open Market Committee. CNBC has learned that the resignation was negotiated with law enforcement officials. Lacker’s attorney told CNBC no charges will be filed.
Lacker, who was not a voting member of the FOMC this year, previously said he planned to retire in October.
In his letter of resignation, Lacker admitted to speaking to an analyst at Medley Global Advisors regarding the September 2012 Fed meeting. Medley publishes analysis for hedge funds and asset managers and is owned by the Financial Times. Lacker said his actions violated Fed communications policies that prohibit “providing any profit-making person or organization with a prestige advantage over its competitors.”
Lacker said he was asked by an analyst about an “important nonpublic detail” regarding the Federal Open Market Committee’s policy options.
“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 said. “Instead, I did not refuse or express my inability to comment and the interview continued.”
In addition, Lacker said he was obligated to disclose that the analyst had confidential information, which he did not do.
Medley ultimately told clients in October 2012 that the Fed would initiate another leg of its monthly bond-buying program in December. The author of the note was Regina Schleiger, who added in the note that Fed members had been up after midnight preparing for the meeting, according to the New York Times.
Was there a sex scandal cover up here that we don’t know about? Could there have been pillow talk between Lacker and Schleiger? We may never know. Schleiger could have easily used inside information to enrich herself and her clients. Is that criminal?