Do you remember the Fed’s Quantitative Easing purchases after the 2008 crisis? Turns out there was a leak about this that caused an uproar. Some insiders learned of the QE3 plans and were able to trade on that information ahead of the market.
Now, they’ve found the leaker, it and it was none other than Jeff Lacker, the Richmond Fed president. Yikes!!! Dr. Lacker has often appeared on campus and is a friend to my university.
His misdeed was implicitly verifying information that a reporter had obtained elsewhere, and then not reporting this slip immediately.
This is not insider trading because he made no money on this, nor did he intend to. This was, purely and simply, an unintentional mistake, but the much bigger mistake was failing to disclose it.
Talking to reporters and market analysts is part of a Fed president’s job; the hard part is knowing the boundary between public and private information.
Sadly, this is a blow to the entire Fed, not just to one person.