Federal Reserve Bank of Richmond President Jeffrey Lacker resigned abruptly on Tuesday as he disclosed his role in the leak of confidential information about policy options that the central bank was considering in 2012.
Lacker said during a phone conversation with an analyst from Medley Global Advisors in October 2012 that she brought up an “important non-public detail” about Fed policy makers’ discussions before a meeting, according to a statement emailed by law firm McGuireWoods in Richmond, Virginia, on Tuesday. Due to the confidential and sensitive nature of the information, Lacker said he should have declined to comment or immediately ended the call.
“Instead, I did not refuse or express my inability to comment and the interview continued,” he said.
Lacker, 61, said he also failed to report to the Federal Open Market Committee that the analyst was in possession of confidential FOMC information. The day after, when the analyst published details of one of the policy options in a report for subscribers, Lacker said he realized his failure to comment on the information was seen as a confirmation of it.
“I regret that in this instance I crossed the line to confirming information that should have remained confidential,” Lacker said. “In 2012, my conduct was inconsistent with those important confidentiality policies.”
Lacker, who had previously announced he would retire in October, declined to comment beyond the statement when contacted by phone on Tuesday. No charges will be brought against Lacker, his attorney at McGuireWoods, Richard Cullen, said in an emailed statement, adding that the investigation into the Fed president is complete.
Internal Investigation
The Medley report led to an internal Fed investigation, and Lacker said he failed to provide a full account about his conversation with the analyst in a questionnaire and interview with the Fed’s general counsel in December 2012.
The Fed’s Office of Inspector General said in a statement Tuesday it will be finishing its investigation into the leak, without providing further details. In a statement on its website, the Fed Board said it is committed to maintaining confidential information, and cooperated with the law enforcement investigation. “We appreciate the diligent efforts made to bring this matter to its conclusion,” the Fed Board’s statement said.
The Justice Department and FBI joined the inquiry in 2015 amid pressure from Congress for details about the leak. Lacker said during that year he disclosed the breach to law enforcement officials in an interview during their investigation. “In the subsequent 2015 interview with law enforcement officials, I did disclose that the analyst was in possession of confidential information during my October 2, 2012 conversation with her,” Lacker said.
In its September 2012 meeting, the FOMC decided to buy $40 billion a month of mortgage securities in the third round of so-called quantitative easing. The Medley report, titled “Fed: December Bound,” telegraphed the possibility that $45 billion of U.S. Treasury purchases would be added to the program, as well as the possible adoption of guidelines on levels of unemployment and inflation that officials would seek to achieve before raising interest rates from near zero.
Federal law allows for criminal penalties of up to a year in prison, fines and removal from office for U.S. government employees who disclose confidential information. Prosecutors can also bring fraud charges against government officials if there’s evidence that the confidential information was used as part of an insider trading conspiracy.
Robert Rough, a former director of the New York Fed, is the only Fed official prosecuted for leaking information. Charged in the 1980s for tipping off a brokerage firm about interest-rate policy, Rough eventually pleaded guilty to bank fraud and was sentenced to six months in prison.
The Richmond Fed, in a separate statement on its website Tuesday, said the bank’s board of directors took “appropriate actions” after learning the outcome of the government investigation. Richmond Fed First Vice President Mark Mullinix is serving as the bank’s acting president. The bank places “a high priority on safeguarding information.”
Lacker, who started at the Richmond Fed as an economist in 1989, isn’t a voter on the policy-making FOMC this year. He had been president since 2004.
He was reappointed by his board of directors in December 2015 to a new term that began March 1, 2016, and was to end on his 65th birthday, in 2020. At the time, the Richmond Fed’s board expressed their approval of Lacker’s performance and asked the Fed Board in Washington to approve his reappointment.