Swordsmyth
03-11-2018, 10:55 PM
Back in 2015, we detailed (https://www.zerohedge.com/news/2015-12-03/academic-study-shows-fed-engaged-systematic-leaks-insiders) a study by researchers at Duke University and the University of California at Berkeley pointing to quantitative evidence that The Fed consistently leaks (http://www.valuewalk.com/2015/10/goldman-sachs-fed-leak/) non-public information about its meetings.
The study (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2687614), first reported by The Daily Californian (http://www.dailycal.org/2015/11/30/uc-berkeley-professor-research-team-find-evidence-information-leaks-fed/), considers historical patterns in stock prices relative to the distribution of non-public Fed information (http://www.valuewalk.com/2015/10/goldman-fed-leak/). “The Fed uses ‘informal communication channels’ on even-numbered weeks after FOMC meetings,” the report said, pointing to leaks (http://www.valuewalk.com/2015/10/fed-leak-scandal-holds-up-seth-carpenters-charmed-career/) making it into media stories such as the Wall Street Journal as well as showing up in private financial advice.
To support their claims, researchers point to private advice (http://www.valuewalk.com/2015/03/fed-leak-investigation-2/) received by financial investors and news reports (http://www.valuewalk.com/2015/08/fed-minutes-leaked/) that contained non-public information discussed in FOMC meetings. “The informal communication can steer market expectations by engaging with private forecasters and newsletters that influence market inference of current and future policy,” the report stated, citing the goal of managing market expectations. “Informal communication facilitates learning by the Fed from the financial sector about how the Fed’s assessment of the economy compares to that of the financial sector and about how markets are likely to react to a particular policy decision.”
https://www.zerohedge.com/sites/default/files/inline-images/Fed-leaks-1.png
At the time, the report dovetailed with a recent insider trading investigation of the Fed, which was mentioned in the report. The report authors pointed to a lack of concern regarding being investigated or prosecuted for the wide-spread if brazen leaks:
We provide a list of Fed leaks of the FOMC outcome (or key determinants thereof) or the FOMC minutes (http://www.valuewalk.com/2015/11/last-sighting-machus-red-fox/) to private financial institutions, again being constrained in seeing only the leaks that emerge in the public domain. The most well-known example is the October 3, 2012 leak to Medley Global Advisors (MGA), a policy intelligence firm. It is clear from that document that Regina Schleiger, the MGA analyst, had a copy of the FOMC minutes from the September 2012 FOMC meeting, which were due to be released the day after her article. In addition, she provides a step-by-step account of the policy debate among FOMC members ahead of the September 2012 FOMC meeting, information that goes beyond the content of the minutes.
Two things are notable about this example beyond the leak itself. First, it is informative that the analyst wrote the newsletter without a concern for the legality of extracting and conveying inside information to those who could trade ahead of the minute release announcement. One possible interpretation of this is that leaks are commonplace and not prosecuted. Second, the subsequent investigations of the MGA leak offers evidence of the systematic nature of informal communication between the Fed and the financial sector (http://www.valuewalk.com/2015/11/ofrs-berner-says-financial-stability-threat-is-medium/).
We noted at the time that in some respects, the lack of concern regarding legal consequences for its actions reflects a growing trend after 2008 where elite financial players didn’t believe their transgressions would be investigated much less prosecuted.
Three years later and still no prosecutions... and now a new report by University of Chicago Booth School of Business Ph.D. candidate David Finer, (https://research.chicagobooth.edu/-/media/research/stigler/pdfs/workingpapers/18whatinsightsdotaxiridesofferintofederalreservele akage.pdf) has exposed The Fed's clear manipulation and rigging of financial markets through 'leaked' information.
https://www.zerohedge.com/sites/default/files/inline-images/2018-03-10_10-36-41.png
As The Wall Street Journal reports, (https://www.wsj.com/articles/taxi-study-finds-increase-in-trips-between-fed-banks-around-fomc-meetings-1520226104) Finer found a jump in New York City taxi cab activity between the Federal Reserve Bank of New York and major Wall Street banks around the time of central bank policy meetings, and the study’s author says the findings suggest an increase in informal communications between Fed employees and individuals in the private sector could be occurring.
Mr. Finer used government-provided GPS coordinates, vehicle information and other travel data to track taxi traffic between the addresses of the New York Fed and major banks. His research pointed to increased traffic between the destinations around lunch and late evening hours, which suggested informal meetings were taking place.
More at: https://www.zerohedge.com/news/2018-03-10/rigged-nyfed-slams-study-showing-increased-comms-between-banks-fed-around-fomc
The study (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2687614), first reported by The Daily Californian (http://www.dailycal.org/2015/11/30/uc-berkeley-professor-research-team-find-evidence-information-leaks-fed/), considers historical patterns in stock prices relative to the distribution of non-public Fed information (http://www.valuewalk.com/2015/10/goldman-fed-leak/). “The Fed uses ‘informal communication channels’ on even-numbered weeks after FOMC meetings,” the report said, pointing to leaks (http://www.valuewalk.com/2015/10/fed-leak-scandal-holds-up-seth-carpenters-charmed-career/) making it into media stories such as the Wall Street Journal as well as showing up in private financial advice.
To support their claims, researchers point to private advice (http://www.valuewalk.com/2015/03/fed-leak-investigation-2/) received by financial investors and news reports (http://www.valuewalk.com/2015/08/fed-minutes-leaked/) that contained non-public information discussed in FOMC meetings. “The informal communication can steer market expectations by engaging with private forecasters and newsletters that influence market inference of current and future policy,” the report stated, citing the goal of managing market expectations. “Informal communication facilitates learning by the Fed from the financial sector about how the Fed’s assessment of the economy compares to that of the financial sector and about how markets are likely to react to a particular policy decision.”
https://www.zerohedge.com/sites/default/files/inline-images/Fed-leaks-1.png
At the time, the report dovetailed with a recent insider trading investigation of the Fed, which was mentioned in the report. The report authors pointed to a lack of concern regarding being investigated or prosecuted for the wide-spread if brazen leaks:
We provide a list of Fed leaks of the FOMC outcome (or key determinants thereof) or the FOMC minutes (http://www.valuewalk.com/2015/11/last-sighting-machus-red-fox/) to private financial institutions, again being constrained in seeing only the leaks that emerge in the public domain. The most well-known example is the October 3, 2012 leak to Medley Global Advisors (MGA), a policy intelligence firm. It is clear from that document that Regina Schleiger, the MGA analyst, had a copy of the FOMC minutes from the September 2012 FOMC meeting, which were due to be released the day after her article. In addition, she provides a step-by-step account of the policy debate among FOMC members ahead of the September 2012 FOMC meeting, information that goes beyond the content of the minutes.
Two things are notable about this example beyond the leak itself. First, it is informative that the analyst wrote the newsletter without a concern for the legality of extracting and conveying inside information to those who could trade ahead of the minute release announcement. One possible interpretation of this is that leaks are commonplace and not prosecuted. Second, the subsequent investigations of the MGA leak offers evidence of the systematic nature of informal communication between the Fed and the financial sector (http://www.valuewalk.com/2015/11/ofrs-berner-says-financial-stability-threat-is-medium/).
We noted at the time that in some respects, the lack of concern regarding legal consequences for its actions reflects a growing trend after 2008 where elite financial players didn’t believe their transgressions would be investigated much less prosecuted.
Three years later and still no prosecutions... and now a new report by University of Chicago Booth School of Business Ph.D. candidate David Finer, (https://research.chicagobooth.edu/-/media/research/stigler/pdfs/workingpapers/18whatinsightsdotaxiridesofferintofederalreservele akage.pdf) has exposed The Fed's clear manipulation and rigging of financial markets through 'leaked' information.
https://www.zerohedge.com/sites/default/files/inline-images/2018-03-10_10-36-41.png
As The Wall Street Journal reports, (https://www.wsj.com/articles/taxi-study-finds-increase-in-trips-between-fed-banks-around-fomc-meetings-1520226104) Finer found a jump in New York City taxi cab activity between the Federal Reserve Bank of New York and major Wall Street banks around the time of central bank policy meetings, and the study’s author says the findings suggest an increase in informal communications between Fed employees and individuals in the private sector could be occurring.
Mr. Finer used government-provided GPS coordinates, vehicle information and other travel data to track taxi traffic between the addresses of the New York Fed and major banks. His research pointed to increased traffic between the destinations around lunch and late evening hours, which suggested informal meetings were taking place.
More at: https://www.zerohedge.com/news/2018-03-10/rigged-nyfed-slams-study-showing-increased-comms-between-banks-fed-around-fomc