Reuters Investigates the Fed’s Selective Leaks

Guess who gets them?

This Reuters investigation of the Federal Reserve deserves a much wider airing than it’s gotten.

The wire reports that the Fed, which is known as a tough nut for reporters to crack, is actually something of a sieve when it comes to leaking to former colleagues who specialize in tips for the super-rich.

The lede looks at former Fed governor Larry Meyer’s insider report on the Fed’s August meeting, which got the scoop on details well before anyone else:

The inside scoop, which explained how rising mortgage prepayments had prompted renewed central bank action, was simply too detailed to have come from anywhere but the Fed.

A respected economist, Meyer charges clients around $75,000 for his product, which includes a popular forecasting service. He frequently shares his research with reporters, though he kept this note out of the public eye. Reuters obtained a copy from a market source. Meyer declined to comment for this story, as did the Federal Reserve.

This selective dissemination of information gives big investors a competitive edge in the market. In the past, Fed officials themselves have privately expressed discomfort about the cozy ties between the central bank and consultants to big investors, though their concerns have largely fallen on deaf ears.

It raises questions about whether Fed officials are breaking the law here by discussing huge market-moving information with private investors and consultants. For instance, Reuters reports, The Wall Street Journal followed five days later with more details on the same information, and it moved bond yields a huge 20 basis points (0.2 percent).

Reuters nicely contrasts how open the Fed seems to be with some of its cronies versus how opaque it is for the rest of us. It also contrast’s the Fed’s approach to that of Europe, which hold press conferences after its meetings.

Even better, it touches on the Fed’s coziness with the financial industry and the revolving door:

For the U.S. Federal Reserve, the willingness to share market-sensitive information may reflect the institution’s history and culture. Critics have long argued that the central bank has been too close to the financial industry.

This ought to be a big story. This inside information is worth billions of dollars. It’s corrupt that officials are giving it to their $75,000 newsletter-selling pals while keeping the public in the dark. It tilts the playing field—yet again—against regular investors.

A big round of applause to Reuters for this one. I’d like to see the rest of the press follow it.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.