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Lawmakers: Criminal Investigation of Fed Leak Appears Timed to Obstruct Congressional Probe

Washington, Jun 17 -

WASHINGTON – Leaders of the House Financial Services Committee suspect the recent criminal investigation into a 2012 leak of market-sensitive information at the Federal Reserve was timed in an effort to obstruct Congress’s investigation into possible misconduct or mismanagement at the Fed.

Last month the Committee subpoenaed the Fed for documents related to the leak of confidential deliberations from a September 2012 Federal Open Market Committee (FOMC) meeting.  Details of that FOMC meeting were reported in a client-only special report by Medley Global Advisors before their official release.  Medley’s clients include hedge funds, institutional investors and asset managers, according to its website.

Both the Federal Reserve and the Fed’s Office of Inspector General (OIG) told the Committee they had previously conducted and closed internal investigations but were unable to identify who leaked the information to Medley.  However, one month after the Financial Services Committee began its investigation into the matter, the OIG suddenly reopened its investigation and informed the Committee that there was now an open criminal investigation into the leak by the Department of Justice (DOJ).  The Fed has cited that inquiry as a basis for its refusal to comply with the congressional subpoena.

In a letter sent today to Federal Reserve Chair Janet Yellen and the OIG, Committee Chairman Jeb Hensarling (R-TX) and Oversight and Investigations Subcommittee Chairman Sean Duffy (R-WI) called the timing of the criminal investigation into the leak “suspect” and a possible “pretext for the Fed and the OIG to delay complying with this Committee’s requests.” 

“That too is now the subject of the Committee’s investigation,” they said.

“You have both advised that complying with the Committee’s subpoena could compromise the integrity of the OIG’s and/or DOJ’s investigation – but it is the integrity of your previous investigation that is at issue here,” Hensarling and Duffy write.  “Moreover, your legally baseless refusal to comply with the Committee’s subpoena and records request is compromising the integrity of this Committee’s lawful investigation and oversight.”

Moreover, the Committee leaders write that the OIG is erroneously claiming that “executive privilege” prevents it from complying with the Committee’s request and the Fed is relying upon this claim as a basis to refuse to comply with the subpoena.

However, executive privilege cannot be asserted to Congress without specific authorization by the President, according to precedent and DOJ’s Office of Legal Counsel.

“However, even if the President attempted to assert executive privilege over the requested records, the privilege does not apply to investigations into government misconduct, such as this one,” Hensarling and Duffy write in their letter. 

“[P]ast administrations have refrained from invoking executive privilege in matters involving unethical conduct,” they note.  “Regardless, executive privilege is not a trump card to evade Congressional oversight.”

The Committee therefore “expects full and immediate compliance with its subpoena and investigative requests.”

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