Two Federal Reserve staff members failed to follow the central bank’s rules that dictated how to handle the minutes of policy meetings before they are released to the public, an audit report released today showed.
Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. were among at least 15 financial companies that received potentially market-moving Fed information 19 hours before the public in an April release the central bank called a mistake.
Brian Gross, a member of the Fed’s congressional liaison staff, handed out the minutes of the Federal Open Market Committee’s March meeting at 2 p.m. Washington time on April 9. The distribution list also included congressional staff members and trade groups. Gross was not named in today’s report.
FOMC minutes, describing the committee’s discussions about the direction of monetary policy and outlook for the economy, are among the most closely scrutinized Fed documents as the panel debates when to begin tapering its third round of bond purchases. The inadvertent release raised questions about the central bank’s internal controls among attorneys and disclosure experts.
Neither the public affairs assistant nor the special assistant to the Board in the Congressional Liaison Office “handled the FOMC minutes in accordance with the Program for Security of FOMC Information,” according to the report by the Fed’s Office of Inspector General. The staff members “may have benefitted from a comprehensive training program.”
The central bank should also take steps, including developing procedures for “ensuring that only publicly available information is sent to the Congressional Liaison Office contact list” and limiting access to document types in its publication system, the report said.
The public affairs assistant emailed a copy of the minutes to a staffer in the Congressional Liaison Office without including the “proper indicators” required when sending restricted information, the report said. The recipient of the e-mail also didn’t have “explicit permission” to receive the minutes early, it said.
The Fed, after learning of the mistake, released the minutes to news media at about 8:35 a.m. on April 10 under embargo for publication at 9 a.m. in Washington instead of the planned time of 2 p.m.
The minutes of the March meeting showed that several Fed officials said the central bank should begin tapering its quantitative easing program later this year and stop it by year end. The committee, led by Chairman Ben S. Bernanke, decided at the gathering to press on with $85 billion in monthly bond buying until the labor-market outlook “improved substantially.”
Sixty-five percent of economists surveyed by Bloomberg Aug. 9-13 said the FOMC will probably begin tapering asset purchases at its Sept. 17-18 meeting.