“I’m shocked, shocked to find that gambling is going on in here!” says Captain Renault in “Casablanca”.
Richmond Fed President Jeffrey Lacker resigned immediately yesterday after confessing he leaked Fed meeting information to a hedge fund advisory firm days before the minutes from a previous meeting were to be released in Oct. 2012.
The firm, Medley Global Advisors, placed a call into Lacker’s office and he answered the analyst’s questions. The fact that Lacker misled three or possible four investigations into the leak and was allowed to stay on at the Fed for almost 5 years is a testament to the crony capitalism practiced at the Fed.
But this is only half of the leak. In late September of 2012 the Wall Street Journal’s John Hilsenrath, who covers the Fed, wrote on how the Fed was about to embark on a massive mortgage-backed securities buying spree, which would be called QE 3.
The leaker in that case has never been identified, but that’s what Medley Global was calling Lacker about and he not only confirmed that report but went further.
So the question is did Lacker give Hilsenrath his information — more than a week before the minutes were to be released? Or was there another leaker in late Sept. 2012?
One thing is for sure, don’t ask Fed chief Janet Yellen about insider trading leaks at her press conference. Hilsenrath’s WSJ colleague Pedro da Costa tried to do that in March 2015 and was soon told by his bosses that he was no longer covering the Fed’s press conferences. This is a career death-knell for a reporter covering the Fed.
There’s one other thing about Hilsenrath that always bothered me. How he produced 600 word stories on the latest Fed action and posted it one minute after the release of the information? He must be a speed reader and a quick typist.
So with Lacker’s five-year-old admission, will we get the name of the other leaker? Let’s wait and see.
But as far as the inside money of Wall Street goes, it’s what the croupier says to Captain Renault to close out that scene: “Your winnings sir.”