Fed leaks lead to billions on Wall Street balance sheets

My collegue at The New York Post, John Crudele, wrote on Monday about how the New York Fed President Bill Dudley, back in 2011, was meeting with the Street during “quiet periods” at the Fed.

Crudele FOIAed Dudley’s calendar to see who is was lunching with during the tumultuous time in 2011.The quiet period is the time frame where the Fed is considering policy changes prior to a meeting. The prep work prior to the meeting with position papers and economic modeling gives the participants a strong sense of what is being considered, hence the quiet period.

During one of these times in March 2011, Dudley met with Jan Hatzius, chief economist of Goldman Sachs. Dudley held the same position at Goldman, so he and Hatzius were friends. Yet Goldman could profit immensely knowing if the Fed was leaning toward implementing QE2.

This all comes to life as Richmond Fed President Jeffrey Lacker resigned immediately last week for leaking information ahead of the Fed minutes being released.

However, Lacker “crime” was confirming and advancing a bit information on the Fed that was published days before by Jon Hilsenrath at the Wall Street Journal.

That story prodded an investigation by many federal agencies from the SEC, CFTC and then NY federal attorney Preet Bharara. No further information has been uncovered who was involved in tipping off Hilsenrath for hisĀ  exclusive story.

The Federal Reserve’s purchase of trillions of dollars in specific securities is the prime reason why Wall Street wanted to get the tip in order to front run the Fed. There are billions to be made in fees and profits by the actions.

Let’s not forget that Goldman and other Wall Street financial firms own the Federal Reserve, by holding shares in the institution, so the conflicts are tremendous.