The Federal Reserve’s Latest Scandal

Brad Hoppman

We know the Federal Reserve’s goals are twofold: to stabilize inflation and maximize employment growth.

However, it was apparent this morning that it has added a third mission: to help line the pockets of its buddies on Wall Street.

Let me explain …

This morning the Fed announced it had “inadvertently” released the minutes of its March 19-20 Federal Open Market Committee meeting yesterday afternoon, a full day early

I guess that "mistake" could be tolerated if everyone got the data early.

But the minutes were only e-mailed to a small group of around 100 Congressional staffers and trade lobbyists.

Surprise, surprise … many of these lobbyists work for, or have worked for, hedge funds, banks and other financial institutions. And who knows how many passed on this information to their friends.

In fact, lobbyists for Citigroup (C) and JPMorgan Chase & Co. (JPM) were among those to have received the minutes yesterday.

Meanwhile, the Fed didn’t release the same information to the broader markets until this morning at 9 a.m. — giving its buddies on Wall Street a full 17-hour head start to trade on this information.


OK, the Fed made a "mistake." That’s not exactly a shocker. But there’s an easy fix, right? After all, this is public information … why the delay in getting this information out to the rest of us until today?

The Fed claims it didn’t know about the early release until this morning.

However, as those of us in the publishing business can attest, there is always someone who knows exactly when a message is going live … and to whom.

And Washington (and Wall Street, for that matter) wonders why retail investors never seem to trust them!


The Fed said its inspector general will investigate its procedures for releasing the minutes.

It’s also possible the Securities and Exchange Commission and Commodity Futures Trading Commission may investigate to see if any trades were made based on the early release. But I don’t see any convictions on the horizon…


As if this incident wasn’t bad enough … there are plenty of cases of our own Congressmen trading on inside information.

“60 Minutes” ran a piece last year detailing many instances of insider trading by our elected officials in Washington. You can see the piece here.

Here are some of the more notable moments of Washington having an investing edge over everyday investors …

Rep. Spencer Bachus (R-Ala.) was in a closed-door meeting with Ben Bernanke when he warned of the global financial meltdown that was about to occur. Bachus used this information to enter short positions that ended up profiting while the markets tanked.

John Boehner (R-Ohio), who at the time was House Minority Leader, profited on health insurance stocks he bought right before he helped kill a proposal for government funded health insurance.

Illinois Congressman Dennis Hastert bought some land in his home state.  Surprisingly, the state legislature decided to build a highway through this land, netting the Congressman a cool $2 million on the sale.

Even former Speaker of the House Nancy Pelosi (D-Calif.) and her husband invested in eight IPOs, including an investment in Visa (V) when it went public in 2008.

She purchased 5,000 shares right before a piece of legislation was moving through the House that would have damaged the credit card company’s profits.

Funny enough, the legislation never reached the floor of the House for a vote. Again, no convictions…

Once again, we’re left to question the credibility of our leaders and whether or not individual investors stand a chance against insiders and institutions with early access to market-moving information.


It is difficult to have an edge against hedge funds, banks or even our elected officials when they have access to — and can use – non-public information well before it ever hits our computer screens or newspapers.

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In Other Market News:

  • It was another historic day for the major U.S. indices. The S&P 500 set a new intraday record high, topping the previous high of 1,576.09 set on Oct. 11, 2007. The Dow Industrials also extended their gains to set a new all-time high. The Nasdaq Composite soared more than 1.5% to hit its highest level since 2001.
  • This came after unexpectedly good news hit the tape about Chinese imports surged 14.1% in March from the same period a year ago, well-ahead of the expected 6.1% increase. This was welcome news to those who feared the world’s second-largest economy was beginning to lose steam.
  • China’s imports might have soared, but the world’s largest exporter only saw export growth of 10% in March compared to the same period a year ago. This fell slightly short of the consensus estimate of a 10.5% increase.
  • Goldman Sachs (GS) cut its price targets for gold this morning. Goldman now sees gold at $1,530 per ounce in three months, down from its prior estimate of $1,615. They also lowered their 2013 year-end price target to $1,450 per ounce, down from $1,600.
  • Of course, Goldman removed Domino’s Pizza (DPZ) from its conviction buy list on April 4 and shares are now up more than 5% and it removed Apple (AAPL) on April 2, and shares are now up more than 2% since. So, we don’t plan on taking any cues from its gold forecast.
  • Speaking of money (of the digital variety), virtual currency Bitcoin endured big volatility in today’s trading. We warned you last week that the Bitcoin bubble was set to burst. It hit a new all-time high of $266 before crashing as low as $105. The last price as of this writing was $139.
  • This price movement was a huge collapse in price, as we predicted. We are currently researching this event and expect to provide more details later this week.
  • President Obama sent his $3.8 trillion budget to Congress today, which looks to tame the deficit by raising taxes on the wealthy and cutting costs from Social Security and Medicare. His budget projects $1.8 trillion in deficit reductions over the next decade.
  • Obama’s budget also proposes nearly doubling the federal tax on cigarettes to $1.95 per pack to fund a new preschool program for 4-year-olds. This year’s budget deficit is projected to be $973 billion.

Good Luck and Happy Investing,

Brad Hoppman


Uncommon Wisdom Daily