Bloomberg Gets Secret Info From the Fed

The Federal Reserve July monetary policy meeting minutes were scheduled for release at 2 p.m Eastern Time, today. At 1:47 p.m., the Fed put out a statement saying that the embargo on the minutes had been broken.

The minutes are extremely sensitive information as traders often react to details of the minutes, and considering that the Fed is close to increasing rates, the minutes are even more significant.

But Bloomberg blasted this headline out before the embargo expired: MOST FED OFFICIALS IN JULY SAW CONDITIONS FOR RATE RISE NEARING. It appears that the embargo was broken at aprox. 1:35 p.m.

Bloomberg has since issued this statement:

In the process of preparing embargoed material we inadvertently sent a headline ahead of the embargo,

What is really stunning about this is that the Fed is providing the data to Bloomberg in advance. This type of information is extremely valuable to have in advance and I am sure there is more than one hedge fund manager or bond trader who wouldn’t think twice about paying for this information, to get it even two minutes in advance.

In 2013, I wrote:

I am aware of a money manager, back in the old days, who paid a reporter to show up at the headquarters of the Bureau of Labor Statistics in Washington D.C. and grab the employment report before it was published across the wires. Back then, the BLS would release a hard copy of the number to reporters 15 to 30 minutes before it was to be officially released.  LOL, the report would have stamped on it “Embargo, not to be released until x time.”  But the reporter on the payroll of the money manager, as soon as he had his copy, would run across  the street in front of the BLS headquarters to Union Station, grab a payphone and call the numbers into the money manager on Wall Street who was waiting for the call so he could put on bond trades ahead of the number being publicly released.

I am also aware, way back when, of a hedge fund-type operator, who would occasionally be tipped off minutes before news came across the Dow Jones wire, of takeover etc.. I’m not sure, who his source was and it didn’t happen often, but when it did, it was valuable information that you could trade for serious $$$.

As far as I know, the BLS now locks all reporters in a room when a sensitive release is about to be issued to them until the embargo time has passed, not allowing them to go to the bathroom or even have their cell phones with them. It is simply stunning to me that the Fed provides advance copies of its releases, in this day and age, in advance, to any news media organization.

Reprinted with permission from Economic Policy Journal.