Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Blog


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
January 25, 2016 9:57AM

Fed Disclosure

By William Poole

SHARE

Earlier this month, the Federal Reserve released FOMC transcripts and related materials from 2010. One of the issues—an important one—discussed in October and November of 2010 concerned Fed disclosure of inside information. Those transcripts hit one of my hot buttons. Fed leadership, instead of being defensive as shown in the 2010 transcripts, should be vocal in explaining why non‐​public activities further the cause of sound monetary policy.


Consider first an extreme view, a view that will help to frame disclosure issues. Would we want the Fed to confine its contacts with outsiders to public meetings at which press were present, or could be present? In that case, the FOMC would make its policy decisions solely on the basis of publically available information, such as that released by the Bureau of Labor Statistics and other statistical agencies. Keep in mind that under this view Fed officials would not only cease to have any non‐​public meetings with private sector individuals but also with government officials.


I add government officials to the mix because it is well known that some members of Congress and congressional staff make stock trades based on inside information.


FOMC practice has long been to gather nonpublic information, some of which is presented in FOMC meetings. The beginning of every FOMC meeting is occupied with presentation, and discussion, of anecdotal information. I always made an effort to smoke out expectations about the future from my sources. Forward‐​looking information is especially important because there is little formal statistical data on business plans for hiring and investment. As an example, I routinely asked my contacts at FedEx and UPS about their plans to add capacity in the busy holiday season and what their customers were telling them about their expectations. I asked my Wal‐​Mart contact about his interpretation of retail sales. Did he think that recent sales reflected idiosyncratic issues for his own company or were the trends more general?


The FOMC has long believed that such information strengthened the policy process. I know of no study that has attempted to quantify the policy value of anecdotal information, but have to believe that this approach is sound. Fed critics remind me of the old saw about the weatherman. Look out the window. Can’t you see that it is snowing? Do you want the Fed to stop looking out the window? Would it not have been helpful in 2008 if the Fed had had some detailed inside information about the condition of Lehman and AIG?


The Federal Reserve has long had robust policies, and active internal controls, to prevent insider trading by all employees, especially those with access to confidential policy information. Yes, nonpublic contacts with industry insiders do raise the risk of improper disclosure. What is the evidence on that score?


I know of only three prominent, evident or possible violations of this confidentiality. One is ongoing today: an unresolved case concerning an alleged leak of FOMC information in 2012 to Medley Global Advisors. In the second case, Rohit Bansal, a former Goldman‐​Sachs employee, was convicted this past November of obtaining inside information from Jason Gross, a former bank examiner at the New York Fed, who was also convicted. In the third case, Robert A. Rough, a former director of the New York Fed pleaded guilty in 1989 to disclosing discount rate actions to securities traders while he was in office. The New York Times story on the case noted that, “Samuel A. Alito Jr., the United States Attorney for New Jersey, said Mr. Rough was the first director in the 75‐​year history of the Federal Reserve System to be convicted of criminal wrongdoing.”


As far as I know, that is it. A damn good record, I would say. I challenge anyone to find an agency of this size and longevity with a superior record. The very highest level of integrity is built into the Fed’s day‐​to‐​day procedures and its DNA. Fed leadership should be defending its disclosure and research policies rather than dancing away, dodging the issue.


A CBS segment on 60 Minutes in November 2011 discussed insider trading by some members of Congress and congressional staff. Public outrage ensued and led Congress to pass the Stock Act, which became law April 4, 2012. By April 15, 2013 Congress had modified the Act, largely gutting it.


The most gentle way I know to summarize the concerns of some members of Congress over Federal Reserve disclosure is that they represent rank hypocrisy.

Related Tags
Finance, Banking & Monetary Policy

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave, NW,
Washington, DC 20001-5403
(202) 842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org