Hensarling accuses Fed of ‘willful obstruction’ in leak probe

Rep. Jeb Hensarling (R-Texas) is accusing the Federal Reserve of “willful obstruction” of his investigation into a 2012 leak of sensitive Fed materials.

Hensarling, the chairman of the House Financial Services Committee, on Wednesday said the central bank has no legal grounds for refusing to comply with his panel’s subpoena, and questioned whether the Fed and Justice Department launched an inquiry into the matter specifically to stymie his investigation.

{mosads}In a letter sent to Fed Chairwoman Janet Yellen, Hensarling and Rep. Sean Duffy (R-Wis.) accused the bank of failing to properly investigate how investment advisers obtained information about Fed proceedings before it was made public.

According to Hensarling, the Fed’s Office of Inspector General (OIG) only ramped up its probe after lawmakers began asking about that case. At that point, the central bank said it could not hand over documents, lest it compromise its investigation.

“Following the committee’s request for records … the OIG suddenly ‘reopened’ its case,” Hensarling wrote. “Other than this committee’s request for records, what new facts suddenly came to the OIG’s attention that would warrant ‘reopening’ a long-closed case?”

The OIG and the Justice Department are both investigating how the advisory firm Medley Global was able to detail for clients what Fed officials discussed in a private meeting, one day before the minutes of that meeting were made public.

Hensarling’s panel has attempted to dig into the matter, and went so far as to subpoena the Fed in May to compel it to produce documents. But Yellen told Hensarling the Fed would not comply with the subpoena immediately, citing the ongoing investigations.

The fact that the Fed’s inspector general briefly examined the matter years ago, and only reopened the investigation after lawmakers began making inquiries, has made Hensarling suspicious. He accused the Fed of “vigorous and coordinated obstruction.”

“One plausible scenario is that the OIG merely ‘reopened’ the investigation to delay complying with the Committee’s requests,” he wrote. “That too is now the subject of the Committee’s investigation.”

But regardless of how and when other Fed investigations began, Hensarling insisted Congress has a right to the documents.

Saying his panel has the “absolute right” to requested records, the Financial Services chairman dismissed claims from the Fed’s inspector general that executive privilege allows it to not comply.

Hensarling said executive privilege can only be invoked against Congress by specific presidential request — and one has not been produced in this matter.

And even if President Obama did try to invoke executive privilege, Hensarling said his staff would still have the right to documents, because that privilege does not cover matters involving government misconduct.

Having made that argument, Hensarling said he expects nothing less than “full and immediate compliance” from the Fed.

The letter made no mention of what would happen if the Fed refused to comply with the committee’s request, including whether Yellen could be found in contempt of Congress. Yellen was not asked about the letter at a press conference Wednesday.

The Federal Reserve declined to comment.