Should the Fed Be Talking to Investors Behind Closed Doors?

There has been much discussion the last few weeks about whether Congress-people and their staff have profited by trading on confidential information acquired through their positions.  Today the Wall St. Journal reports on other privileged investors that may have access to confidential information.  According to the WSJ, certain investors and analysts meet frequently with top Fed Reserve officials, who may provide them with clues about its policy changes.  It gives an an example an August 15 meeting between Ben Bernanke and Nancy Lazar, an economist with International Strategy & Investment Group, after which Lazar, according to the Journal, called clients and told them the Fed was about to implement a strategy that would boost long-term bonds.

Of course, meetings between regulators and industry representatives are not by themselves nefarious.  It makes sense that the Fed wants to hear from those affected about the impact of its policies.  Nonetheless, close contacts between regulators and industry it regulates are troublesome, particularly if the industry may derive more value from these meetings than the regulators do.

WSJ, Investors Bullish on Fed Tips