Fed Calls In Fbi To Probe Interest Rate Leaks

They said the Fed last week asked the justice department for FBI assistance in the inquiry being conducted under the direction of Fed inspector general Brent Bowen and the request had been approved.

The FBI has agreed to work with the Fed to find out what happened, one official said, adding that the inquiry would try to determine the source of the leak and whether any laws or confidentiality regulations had been violated.

The inquiry stemmed from a Reuters report on September 17 disclosing that eight of the 12 district banks in the Federal Reserve System had requested an increase in the discount rate amid mounting evidence the pace of economic expansion is likely to remain brisk in the second half of 1996.

 

The story, written by New York-based reporter Isabelle Clary, quoted an unnamed senior Fed official. It caused bond prices to fall sharply and long-term interest rates to jump.

The disclosure came ahead of the scheduled September 24 meeting of the policy-making FOMC to consider interest rate policy.

Senate Banking Committee Chairman Alfonse D'Amato, a New York Republican, wrote to Fed Chairman Alan Greenspan asking for an accounting of the incident.

As I know you are aware, the premature disclosure of such sensitive interest rate information can add to fluctuations in financial markets, moving rates when no immediate change was intended, D'Amato said in a copy of the letter dated September 23 and released to the media.

I know that you agree that these types of disclosures cannot be tolerated if we want to maintain the Federal Reserve's ability to effectively implement monetary policy, D'Amato said.

Fed spokesman Joseph Coyne declined comment on the reported probe, which was disclosed Monday by the Washington Post and the New York Times. We have nothing to say, he said. Justice department spokesman Bert Brandenburg also declined comment.

A spokesman for the US attorney's Office in Washington said: We anticipate that if the investigation produces any evidence of criminal wrongdoing the U.S. Attorney's Office will become involved.