Meeting with opinion-makers is often a good communication strategy. It has risks, but they usually can be managed. Unless, that is, you’re Janet Yellen, in which case such meetings are best avoided. With an investigation underway about a leak of confidential information, the Fed is learning that lesson the hard way.
In a little noted news item this week, Federal Reserve Chair Janet Yellen acknowledged that she met with Medley Global Advisors, an investment research firm that is under investigation over a possible leak of confidential information from the Fed. Ms. Yellen emphatically denied that Medley was given confidential information during the meeting, but it never looks good for the Fed chairman to be denying improper activity of any kind.
It’s hard to understand why Ms. Yellen met with a private research firm in the first place. Such firms traffic in market-sensitive information and constantly try to offer clients insights that are unavailable elsewhere. So a private meeting with the Fed chair would have been a coup, and Medley surely would have reported to its clients on the content and tone of the meeting. And with no other firm in attendance, it would be easy to exaggerate what was said. Those are big risks for the Fed.
In any organization, private meetings with influential groups can be useful as a means of adding depth or detail to an official’s public comments, but they carry risks. Offering privileged access to just one firm can create all sorts of problems – from perceptions of favoritism to sowing further confusion about strategic plans. For publicly traded companies, such meetings are carefully scripted and monitored, and any new information shared during an after-lunch coffee is disclosed promptly in an 8-K filing.
The Fed has done an admirable job in recent years of communicating more effectively and eliminating much of the guesswork that once surrounded its economic pronouncements and monetary policy decisions. It has successfully adopted many of the practices by which leading companies manage their communications. But private meetings – no matter how tempting – should be off limits to top Fed officials.