Federal Reserve Chairwoman Janet YellenJanet Louise YellenDemocrats face growing storm over IRS reporting provision Hoyer signals House vote on bill to 'remove' debt limit threat Biden's IRS proposal could mark the end of privacy in banking MORE told lawmakers Friday that the central bank will not fully comply with a congressional subpoena, saying it could jeopardize an ongoing criminal probe into a leak of sensitive information.
Yellen told House Financial Services Committee Chairman Jeb HensarlingThomas (Jeb) Jeb HensarlingLawmakers battle over future of Ex-Im Bank House passes Ex-Im Bank reboot bill opposed by White House, McConnell Has Congress lost the ability or the will to pass a unanimous bipartisan small business bill? MORE (R-Texas) that the Fed’s inspector general, as well as the Justice Department, told her that responding to his panel’s “extremely broad” legal demand for documents could get in the way of their own investigations.
According to the Fed’s internal watchdog, “providing access at this time to these records and information would risk jeopardizing its investigation,” wrote Yellen.
“The Federal Reserve is mindful that we must not impede that open criminal investigation,” she added.
Yellen included in her letter a memo from the Fed's Inspector General, which warned that handing over records would pose a "significant risk" to its probe, and asking the Fed to hold off on doing so until its work is completed.
The Fed and Justice Department are currently probing how an investment advisory firm was able to detail for clients discussions at a private 2012 meeting one day before the meeting minutes were made public.
Yellen promised that the Fed will ultimately comply with Hensarling’s demands but only after the criminal investigation is complete. But that rationale is unlikely to sway Hensarling, who has long griped that the Fed has been slow to respond to questions about how the leak at the usually secretive Fed occurred.
A Financial Services Committee staffer called the Fed's resistance "unacceptable and disturbing."
"The Fed once again is acting in a manner that can only be characterized as resistant to accountability, transparency and oversight," the staffer said.
In May, Hensarling’s panel voted to subpoena the Fed for documents surrounding the meeting in question, arguing the central bank had not provided any “legally justifiable reason” for refusing.
In 2012, the firm Medley Global Advisors provided for clients a detailed rundown of Fed deliberations at a private meeting one day before the Fed released the minutes of that meeting.
Any and all deliberations by the central bank are hugely important to financial markets, so any advance notice of Fed thinking could give traders a significant edge.
This post updated at 3:56pm.