When it comes to insider trading, Congress are amateurs compared to the Federal Reserve
By now everyone has had their chance to rage against the openly corrupt congresspeople who bought and sold stocks based on their insider knowledge of various laws being proposed. And you should be outraged at this corruption.
But you should all be aware that this sort of insider trading is an almost imperceptible drop in the ocean compared to what is going on at the Federal Reserve. This happened earlier this week, but most of the public probably didn't notice.
Two Federal Reserve regional presidents apologized on Thursday for multi-million-dollar share purchases that generated the "appearance" of conflicts of interest, according to multiple reports.
In simultaneous statements, Dallas and Boston Fed presidents Robert Kaplan and Eric Rosengren expressed regret for their investment decisions, which involved purchases of big-name firms like Apple, Alibaba, and Tesla.
..."Doing things like this, although not prohibited by the rules, shows poor judgment and really hurts the reputation of the Fed," Roberto Perli, a former Fed economist, told Bloomberg. "Good that [Kaplan] and Rosengren said that they won't trade again as long as they are presidents. But the damage to the institution is done."
To put this into perspective, Congressmen make trade on insider knowledge of legislation that will probably move markets.
The Fed, OTOH, actually moves the markets. Since 2008, the Fed has bought trillions of dollars of financial instruments that have single-handedly moved the markets in their preferred direction for months, and even years at a time.
But, you say, this is only a couple Fed presidents. So it's no big deal, amirite?
Let's go back five years.
(Reuters) - The Federal Reserve was worried that leaks of its confidential discussions in 2010 exposed it to charges of insider trading and raised questions over its credibility, according to transcripts of meetings released on Friday.
The transcripts showed that members of the Federal Open Market Committee discussed the implications of a 2010 Reuters story, which reported that an advisory firm headed by former Fed Governor Larry Meyer sent a note on Aug. 19, 2010 to clients with a breakdown of a policy-setting meeting held nine days earlier.
Let me translate that for those who don't understand what it means. Federal Open Market Committee is the group that actually buys those trillions of dollars in bonds straight off the open market.
As for those "clients" that got the info early, those are called Wall Street banks.
Ahh, now you see the scale of the corruption.
Plus, if you keep reading the article, this sentence appears.
Congress is currently probing the Fed over a 2012 leak, even though 2010 leak has been largely forgotten.
If you were wondering what happened to the immensely corrupt Fed governor Laurence Meyer, well his wiki page says nothing about a criminal sentence.
OK. But that's only three Fed presidents. Surely there aren't other examples.
Take a look at this 2017 article.
NEW DOCUMENTS OBTAINED by a Federal Reserve watchdog group suggest that the Federal Reserve Bank of Richmond’s board of directors may have known that its president was under federal investigation when the board re-appointed him to a new term.
That president, Jeffrey Lacker, resigned his position this week after acknowledging his role in a leak of nonpublic information about Fed policy to an analyst for hedge fund and asset manager clients. The situation highlights the often cozy relationship between central bankers and Wall Street.
In a carefully worded announcement submitted by his attorney Tuesday, Lacker admitted to an October 2012 phone conversation with Medley Global Advisors analyst Regina Schleiger, where she described Fed deliberations over purchasing $45 billion of U.S. Treasury bonds per month as part of their quantitative easing program. Lacker did not deny this, or report Schleiger’s possession of confidential information to Fed staff. In his statement Lacker said, “I realized that my failure to decline comment on the information could have been taken … as an acknowledgment or confirmation of the information.”
So not only do we have a direct example of insider trading, but a regional Fed board of directors knew about it, knew that the guy was being criminally investigated by the feds, and re-appointed him anyway.
As if to say "F*ck You, America! We are above your laws!"
As for Lacker's wiki page, it at least mentions this scandal.
The Fed, Commodity Futures Trading Commission, and U.S. Attorney's Office all investigated the leak, but no charges were brought against any person. Lacker's attorney said that Lacker had cooperated with the Justice Department and that he was "informed that no charges will be brought and that the investigation as to him is complete."
I guess he was above the law after all. The very next year, the Virginia Commonwealth University School of Business announced that Lacker had been appointed Distinguished Professor in the Department of Economics.
Good for him. Isn't it nice to see a white collar criminal, who helped his buddies steal tens of billions of dollars, land on his feet?
OK, this is all a new thing. The Fed never used to be this corrupt, right?
It turns out that a quick search turned up this from 1988.
An indictment returned here Thursday charged Robert A. Rough with insider trading while a member of the New York Federal Reserve Bank, part of the Fed’s regional network, from 1982 to 1984.
Rough, 49, of Layton, N.J., received $47,000 in interest-deferred loans from the now-defunct Bevill, Bresler & Schulman investment firm in exchange for the information, the indictment charged.
Rough is accused of relaying the data by telephone from his executive suite at the National Bank of Sussex County and once from the New York Fed’s boardroom just after a meeting, prosecutors told a news conference.
Besides the relative small size of this scandal, can you see the one crucial difference? Someone was indicted. No one has to pay for corruption on Wall Street anymore.