Patrick McHenryChairman

Washington, May 21, 2015 - Financial Services Committee Chairman Jeb Hensarling (R-TX) issued a subpoena today to the Federal Reserve for its failure to comply with document requests from the committee for information concerning the leak of market-sensitive Fed deliberations to a private financial newsletter.

Chairman Hensarling made the following statement today:

“This leak is another troubling example of the growing nexus between government and business that creates a crony economy where those with the best Washington connections receive special favors.  It is unacceptable, illegal and corrupt for anyone at the Fed to deliver inside information that could provide a financial advantage to the privileged few and lead to the manipulation of financial markets.  Despite the seriousness of this situation, the Federal Reserve has acted in a manner that can only be characterized as resistant to accountability and oversight.  It has repeatedly failed to provide complete and adequate responses to our committee’s valid questions and requests.

“Since the Federal Reserve refuses to cooperate, a subpoena for documents is a prudent and measured approach – entirely consistent with the rules of the committee and the House, and prior precedents established by both Republican and Democratic committee chairmen.”

BACKGROUND ON NEED FOR SUBPOENA:

The Federal Reserve has refused to provide the Committee with requested documents concerning the leak of confidential, market-sensitive information from a 2012 meeting on monetary policy.

February 5, 2015:  Oversight and Investigations Subcommittee Chairman Sean Duffy (R-WI) requested from the Federal Reserve all records related or referring to an unauthorized disclosure of confidential, market-sensitive Federal Open Market Committee (FOMC) deliberations in October 2012 that was revealed by news reports in December 2014, as well as all related communications between FOMC members and the Fed’s General Counsel or his designee about this matter.

• According to news reports, confidential FOMC information was leaked to Medley Global Advisors, which then published this non-public information to clients in an investor advisory memo.

• Anyone disclosing such information would be subject to possible criminal liability, and the unauthorized disclosure clearly suggests that proper internal controls are not in place to safeguard the confidentiality of FOMC meetings.
  

• Despite the seriousness of this matter and the Committee’s important legislative interest in understanding how this breach occurred and ensuring that it does not happen again, the Federal Reserve has resisted the Committee’s oversight. Subcommittee Chairman Duffy’s letter of February 5, which required a response from the Fed by February 19, was ignored until the Committee sent a follow-up letter on March 13, 2015, reiterating the Committee’s request for information pertinent to the FOMC leak.
  

• Not until March 25, 2015, did the Fed send the Committee a letter pertaining to the FOMC leak, but it did not provide any records relating to the unauthorized disclosure of confidential information and merely summarized the policies of the FOMC regarding the protection of confidential information – policies that obviously are not working.
  

• The Federal Reserve to date has not provided any of the documents requested by the Committee and has not provided any legally justifiable reason for its failure to comply with the Committee’s document request.