Jon
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Joined: 13 Apr 2005
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| Bernanke tells Senate banking commttee he made mistake |
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It what marked the end of the first phase of Fed transparency under Bernanke, the Fed chairman said he would not be releasing information related to monetary policy except through Federal Reserve channels. The statement came in response to a question about the Maria Bartiromo interview one weekend about a month back when Bernanke ‘clarified’ his statement to Congress about when the Fed might feel a pause in a rate hiking campaign was warranted. He was concerned the market mistook his meaning and thus the retraction. As we said at the time, the market did overreact somewhat, but it had already taken that back before the weekend of the ill-fated ‘retraction.’ Thus the retraction only exacerbated the situation, pushing the market further in the opposite direction (lower).
As we also said at the time, the disclosure to only one media figure was questionable, and how the story was held until the ‘Closing Bell’ segment on CNBC that next Monday was rather despicable. The story was ‘saved’ until that hour, and when released the market had the reaction you would anticipate: down. For a Fed chairman to give an exclusive and then allow the story to be held almost two days borders on breach of fiduciary duties. For the media to act in complicity is, well, rather typical. It does, however, give new meaning to CNBC’s buzz phrase ‘the most important hour of the trading day.’ Yes, if you withhold market moving information obtained in a questionable manner until the last hour, it certainly does become the most important hour of the day. Similar to the media giant in the James Bond flick ‘Die Another Day’ who manufactured his own news for his ends. Before you start defending Bartiromo, think back to all other Fed statements. They maybe made at private events, but all of the news media gets the information immediately. It is not doled out to one and held only to be released to create maximum impact and to give that reporter a scoop.
This is serious stuff. At a minimum the SEC needs to conduct an investigation to see if any illegal trading was done with respect to this withheld story (e.g. Bartiromo and any other CNBC employees, relatives, etc.), and Bernanke may need to receive an official censure from Congress. He got off scot-free Tuesday and by his answer and demeanor he knew it. At a minimum he violated ethical standards of a public official. Add on top of that how his words literally move world financial markets and you have a very serious issue that has been swept under the rug. The Feds went after Martha Stewart for making one trade on one stock. She went to jail for it. Here we have news that literally moved the market, news that was improperly disseminated by a public official and then improperly held and released with reckless disregard if not actual intent to have the most impact.
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