ROBERT SIEGEL, HOST:
We got an answer today to a Wall Street mystery - who disclosed important confidential Federal Reserve information to a Wall Street analyst back in 2012? It turns out the culprit was a high-ranking Fed official, Jeffrey Lacker, president of the Richmond Federal Reserve Bank. Lacker acknowledged the breach today and resigned. NPR's John Ydstie joins us now to talk about this scandal that has dogged the Fed for nearly five years, John.
JOHN YDSTIE, BYLINE: Right.
SIEGEL: This has been a long-running mystery with multiple investigations. Bring us up to date on it.
YDSTIE: Well, it all began at the regular Fed meeting back in September of 2012. There was a discussion back then about whether the Fed should expand its bond buying program to stimulate the economy. At the meeting, the Fed decided to buy another $40 billion worth of bonds. And it discussed buying even more at the next meeting in December.
Now, Jeffrey Lacker, president of the Richmond Fed, was present during both those meetings. Now, after the September meeting, a newsletter published by the Wall Street firm Medley Global Advisors said there was a strong possibility the Fed would buy a similar amount of bonds at the December meeting. And that's just exactly what happened.
SIEGEL: And today we learned that between the two Fed meetings, Lacker had a phone conversation with an analyst from Medley Global Advisors.
YDSTIE: Right. And in his letter of resignation today, Lacker says that during that conversation he may have inadvertently confirmed that the Fed was going to add billions more to its stimulus program in December.
SIEGEL: John, I assume that one concern here is that Medley subscribers would have gotten an unfair advantage and could have traded on and profited from that confidential information.
YDSTIE: Right, Robert. And, in fact, regulators have a separate investigation into that possibility. But the Fed was also concerned about its reputation as an institution of high ethical standards. After all, it has all kinds of confidential information that can move markets and impact financial institutions, so it needs to be viewed as trustworthy and above reproach.
SIEGEL: Well, is there any evidence that Mr. Lacker might have been trying to profit from this or affect policy by doing this?
YDSTIE: No. But it is interesting that in his letter, Lacker admits when he was questioned back in 2012 during an internal Fed investigation he failed to disclose these compromising details of the conversation he had with the analysts from Medley Global Advisors. But more recently in 2015, he did decide to disclose those details in a conversation with investigators from the FBI.
SIEGEL: What do you make of the fact that his story evidently changed between 2012 and 2015?
YDSTIE: Well, the way Lacker describes the situation suggests he really agonized about this. In his letter, Lacker says the Medley analyst introduced into their conversation this confidential information that the Fed was going to buy more bonds in December, you know, the way journalists sometimes fish for confirmation or a denial. Lacker said at that point he should have just said no comment and hung up the phone. Instead, he allowed the conversation to go on. And the analyst apparently took it as a confirmation. Lacker says he deeply regrets what happened and that he never intended to reveal the confidential information.
SIEGEL: Is he now subject to prosecution?
YDSTIE: Well, not according to his lawyer, who issued a statement today saying we've been informed that the investigation of Dr. Lacker is complete and no charges will be brought against him.
SIEGEL: That's NPR's John Ydstie. John, thank you.
YDSTIE: You're welcome, Robert.
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