Federal Reserve Refuses To Comply With Congressional Subpoena

Posted: June 8, 2015 in Economics


Federal Reserve Chairwoman Janet Yellen told lawmakers Friday that the central bank will not fully comply with a congressional subpoena, saying it could jeopardize an ongoing criminal probe into a leak of sensitive information.

Yellen told House Financial Services Committee Chairman Jeb Hensarling (R-Texas) that the Fed’s inspector general, as well as the Justice Department, told her that responding to his panel’s “extremely broad” legal demand for documents could get in the way of their own investigations.

According to the Fed’s internal watchdog, “providing access at this time to these records and information would risk jeopardizing its investigation,” wrote Yellen.

“The Federal Reserve is mindful that we must not impede that open criminal investigation,” she added.

The House Financial Services Committee has subpoenaed the Federal Reserve for documents over how the firm Medley Global Advisers was able to detail for clients Fed deliberations one day before the central bank released its own account in the fall of 2012.

Since the last leak in 2012, market-sensitive information vitally important to health-insurance companies had once again reached Wall Street before the public, and this time it appears to have come from the government itself.

On Dec. 3, 2013, an official with the agency in charge of Medicare spending held a conference call for industry officials. During the call, he provided data suggesting that federal funding for private Medicare plans would likely fall more than expected.

Word soon reached Wall Street, prompting a selloff in insurance shares. In the subsequent 10 trading days, shares of several major health insurance firms lost between 3% and 9% of their value. Over that same period, the S&P 500 was down 0.5%.

Sources: [The Hill, Wall Street Journal]

  1. […] a few days after Jeb Hensarling accused The Fed of “willful obstruction” in the Congressional leak probe, demanding “immediate compliance” with the subpoena seeing “no legal basis to […]


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