Lawmakers to Fed: We want details about leak probe

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WASHINGTON (AP) — Two Democratic lawmakers are asking the Federal Reserve for details on its reported probe of a leak of market-sensitive information about interest-rate policy.

Sen. Elizabeth Warren of Massachusetts and Rep. Elijah Cummings of Maryland requested the information Thursday from Scott Alvarez, the central bank's general counsel. The Fed's investigation focuses on a 2012 leak of information on the closed-door internal deliberations of Fed policymakers, the lawmakers said in a letter. They cited several news reports in December.

The security of sensitive, market-moving information has increasingly become a concern for federal officials. Possible leaks of government data have led the Labor and Commerce departments as well as the Fed to impose tight procedures for distributing information early to reporters.

Warren and Cummings also asked for the Fed's policies on maintaining confidential information and steps it has taken to prevent future leaks.

Spokesman Eric Kollig said the Fed had received the letter. He declined to comment further.

According to the lawmakers' letter to Alvarez, details of confidential discussions of the Fed's policy-making Federal Open Market Committee at its September 2012 meeting showed up in a financial intelligence newsletter that circulated among traders. The news reports said the sensitive information was included in the newsletter on Oct. 3, 2012, a day before the Fed publicly released its minutes of the September meeting. That would have given traders who received the information an unfair advantage to profit from the decline in U.S. Treasury bond prices that occurred after the Fed released the minutes on Oct. 4.

Warren, a member of the Senate Banking Committee, recently assumed a Senate leadership post and has become the most prominent liberal Democrat in the country on economic and financial issues. Cummings is the senior Democrat on the House Oversight and Government Reform Committee.

"We are disturbed by this lack of transparency regarding such an important topic," they told Alvarez. "This leak contained key market-moving information, violated Federal Reserve policy on disclosure, and may have represented a violation of federal law."

"We believe that the public has the right to know whether the Federal Reserve is taking appropriate action to address leaks of confidential and deliberative information, and to prevent them from occurring in the future," they wrote.

The lawmakers cited news reports by ProPublica and Bloomberg.

In September 2013, the Fed indicated it was concerned about suspiciously heavy trading of gold futures following a meeting of the policy-making body, which may have been triggered by a premature release of confidential information.

The Fed said in a statement that news organizations receiving information early under an embargo system must agree to withhold the data until the time set for its release.

After the policy meeting, the Fed announced it would hold off on slowing its $85-billion-a-month in bond purchases. That surprised markets and led to a day of record highs on Wall Street.

Trading in financial markets is now dominated by automated computer systems, which make transactions in tiny fractions of a second that can lead to millions of dollars in profit. Receiving the data early — even by a few milliseconds — can give an unfair advantage to some firms.

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