Tuesday, October 10, 2017

Federal Reserve's Inspector General Probing Several Fed Economists

Domenico Giannone explaining that information improves forecasting accuracy.
The Federal Reserve’s internal watchdog is probing a group of Fed economists who also own shares in a U.K. economic-forecasting company, reports Katy Burne at the Wall Street Journal.

The inquiry, by the Fed’s Office of Inspector General, centers on several economists who
also have owned shares in London-based Now-Casting Economics Ltd.

Notes Burne:
Like the Fed, the U.K. company makes short-term economic forecasts using real-time data. It sells that information to investment firms, such as hedge funds, which use it to help make market bets. Having a vested interest in the U.K. company puts the Fed economists in a position where they could be suspected of a conflict or the appearance that the U.K. company is selling access to such information.
Domenico Giannone—an assistant vice president in macroeconomic and monetary studies at the Federal Reserve Bank of New York—and a co-founder of Now-Casting Economics ,told WSJ that he disclosed his “involvement” in the U.K. firm before joining the Fed in late 2014. He now owns 30.5% of the U.K. firm, the firm said. Filings with a U.K. government agency still list him as a “person with significant control” in the company.

Giannone told WSJ that he resigned as a Now-Casting Economics director in 2014, just before joining the Fed, and has complied with conditions on his employment set by the New York Fed’s ethics office.

“I do not vote my shares or participate in the business,” he said in an email. “Any suggestion that I have acted improperly is false.”

 Indications are that at least three other Fed economists hold shares in the U.K. firm.


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