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Reuters Special Report: Who's Watching Out For Conflict Of Interest At The Federal Reserve

Federal Reserve building

Federal Reserve building

Federal Reserve building

Ben Bernanke with alan greenspan

Ben Bernanke

Ben Bernanke

Young Ben Bernanke with wife

Very high praise for this investigative piece from Reuters.

Yes, that's Bernanke.  More photos inside.  Plus a very special video.


(Reuters) - To the outside world, the Federal Reserve is an impenetrable fortress. But former employees and big investors are privy to some of its secrets -- and that access can be lucrative.

On August 19, just nine days after the U.S. central bank surprised financial markets by deciding to buy more bonds to support a flagging economy, former Fed governor Larry Meyer sent a note to clients of his consulting firm with a breakdown of the policy-setting meeting.

The minutes from that same gathering of the powerful Federal Open Market Committee, or FOMC, are made available to the public -- but only after a three-week lag. So Meyer's clients were provided with a glimpse into what the Fed was thinking well ahead of other investors.

His note cited the views of "most members" and "many members" as he detailed increasingly sharp divisions among the officials who determine the nation's monetary policy.

The inside scoop, which explained how rising mortgage prepayments had prompted renewed central bank action, was simply too detailed to have come from anywhere but the Fed.

A respected economist, Meyer charges clients around $75,000 for his product, which includes a popular forecasting service. He frequently shares his research with reporters, though he kept this note out of the public eye. Reuters obtained a copy from a market source. Meyer declined to comment for this story, as did the Federal Reserve.

By necessity, the Fed spends a considerable amount of time talking to investment managers, bank economists and market strategists. Doing so helps it gather intelligence about the market and the economy that is invaluable in informing the bank's decisions on borrowing costs and lending programs.

But a Reuters investigation has found that the information flow sometimes goes both ways as Fed officials let their guard down with former colleagues and other close private sector contacts.

This selective dissemination of information gives big investors a competitive edge in the market. In the past, Fed officials themselves have privately expressed discomfort about the cozy ties between the central bank and consultants to big investors, though their concerns have largely fallen on deaf ears.

No one is accusing Meyer and his firm, Macroeconomic Advisers -- or any other purveyors of Fed insights for that matter -- of wrongdoing. They are not prohibited from sharing such information with their hedge fund and money manager clients.

But critics question whether it is proper for Fed officials to parcel out details that have the potential to move markets around the world, especially with the government's involvement in the economy being so pronounced.

"It's certainly not what Fed officials should be doing," said Alice Rivlin, a former Fed governor and now a fellow at the Brookings Institute think tank. "The rules when I was there were you don't talk to anybody about anything that could be used for commercial purposes."

In an effort to counter concerns about close ties between business and government, U.S. President Barack Obama issued an "ethics pledge" that forbids appointees of his administration from contacting the agencies they worked under for at least two years after leaving.

But such measures are tough to enforce. And in the case of the Fed's Washington-based board, governors are allowed to transition directly into a banking sector job immediately after they leave the central bank, though they must first serve out a rather lengthy 14-year term, which many do not.




Z says this guy is looking out for conflict of interest at the Fed.





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Reader Comments (15)

Oct 6, 2010 at 2:34 PM | Unregistered CommenterZ
funny stuff z....i'll add the rothschild pic...
Oct 6, 2010 at 3:16 PM | Registered CommenterDailyBail

Oct 6, 2010 at 3:30 PM | Registered CommenterDailyBail
The government’s tried a lot of tactics in propping up the housing market: Tax credits for home buyers. Mortgage modifications for distressed homeowners. A program to buy up mortgage-backed securities.

Now, some analysts from Bank of America are proposing another plan: Help investors buy up distressed homes and rent them out.

In a recent research paper, the BofA analysts frame this as the second phase of the Public Private Investment Plan. Funded by TARP, which expires Oct. 3, PPIP offered investors funds and credit to buy up residential and commercial mortgage backed securities. The paper calls that program an unqualified success for driving up the value of mortgage backed securities.

Through their proposed PPIP 2, Treasury would use the same model to help investors to directly buy up foreclosed homes.


Run screaming from this idea...
Oct 6, 2010 at 3:30 PM | Registered CommenterDailyBail
Media F***s It Up AGAIN!!! What a joke...

Michelle Obama ranked world's most powerful woman
Oct 6, 2010 at 9:56 PM | Unregistered CommenterZ
DB...Please post this, it is insanity...

Oct 6, 2010 at 10:03 PM | Unregistered CommenterZ
Imagine if it were someone in Palin's family if that helps.
Oct 6, 2010 at 10:12 PM | Unregistered CommenterZ
it is a crazy story z...i've seen this clip...it's posted already in draft form from a few weeks ago...i might get around to it...she is one of millions scamming the system...though she is unique among them due to her nephew...maybe this weekend i'll post it...
Oct 6, 2010 at 11:16 PM | Registered CommenterDailyBail
Yes. It is a good clip for those out there that still think Obamacare is designed to help people and not control people and give the government more power. If Obama believed in helping people, he would start with his own family.

Obama is such a fraud and a mentally sick man with many psychological issues.
Oct 6, 2010 at 11:29 PM | Unregistered CommenterZ
But it is about Barrrrrrak and not Sarah.
Oct 6, 2010 at 11:31 PM | Unregistered CommenterZ
Auntie has the bankster mentality down pat. Being able to game the system for your own benefit isn't "unfair," it's just good luck. And it's all the work of God, anyway. What a great country!
Oct 6, 2010 at 11:33 PM | Registered CommenterDr. Pitchfork
Wow, you both don't get it. That story is not about "the millions scamming the system", it is about President Obama and the most powerful woman in the world, Michelle My Belle Obama. Thus my reference to Sarah Palin, that was a clue.

You two make me laugh.
Oct 6, 2010 at 11:49 PM | Unregistered CommenterZ
If it were about Sarah Palin's cousin and told to you by Jon Leibowitz, you would get whiplash posting it not to mention finding it sooo funny and insightful.
Oct 6, 2010 at 11:58 PM | Unregistered CommenterZ
z...that's not true....i have not posted a main story page about sarah p in many months...perhaps 6 or 7...and there has been plenty of opportunity for me to do so in the interim...i've made my points about sarah and i prefer to let her yap away out of sight....and i already said i would probably get to the obama aunt story soon....i see the hypocrisy there...i'm not blind...and for future reference, insulting me lowers the odds that i'll post what you want....

here's just a taste of what you're up against....i have 300 stories posted in draft form on the site, any of which could and eventually will be a published story...more than 500 videos stored in a folder for future posting...and about 200 current internet tabs open within 17 firefox windows...all of which represent possible stories....then in my email box i have over 500 submissions from readers that i haven't even gotten around to looking at yet...i've let it slack for 3 months...i get about 5-10 video submissions per day...you do the math....

i am overwhelmed by content 24/7, 365 days per year...i need help...i need a group of grad school journalism, mba and economic interns...the daily bail could be such a huge site...try putting yourself in my shoes for once, as the one and only editor of a content stream that's a mile wide and flying by at 100 mph...

and then i also have to give a few hours each day to the other sites i'm working on launching...

'thedeficit.org' is next...and then bizlines.com...and the new front page for the daily bail still isn't finished...i also own the names buzzchoke.com, changista.com, thecaptured.com, thefederaldebt.com/org, americathebankrupt.com/org, overbudget.com/org, and pol99.com...

and i have plans for every single one of those names...so i guess what i'm saying is i'm busy, overworked and i don't need your shit...
Oct 7, 2010 at 1:33 AM | Registered CommenterDailyBail

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