Suppose an inside scoop of official secrets gives some market players an unfair advantage—is that a good reason to muzzle the media?

People who are concerned about runaway secrecy and who cheer when the media break important stories in defiance of government edict may still find this particular affair worrisome.

Suppose the official secrets that are illegally leaked are published in an exclusive newsletter for a narrow sliver of the public that pays a lot of money for them. What’s more, the secrets don’t so much enlighten the broad public—which doesn’t see them—as they enable those lucky customers to cash in by making smarter investments than non-subscribers do.

Now, by and large, even though the government prosecutes leakers vigorously (especially in the national security realm) and tries its best to imprison them, it never goes after the outfits that publish the blown secrets. By custom—if not by statutory or constitutional entitlement, since this immunity has never been tested in court—the media get a pass.

But should the newsletter that brokered the illegal leak to its clients, who sought to profit from it financially, still benefit from the restraint that the U.S. government usually shows to news organizations that run classified material?

So to the case at hand, which involves Medley Global Advisors, owned by the London-based Financial Times. Medley describes itself as “the leading global provider of macro policy intelligence for the world’s top hedge funds, institutional investors, and asset managers. “

In October 2012 a Medley newsletter published delectable, secret information about forthcoming actions to be taken by a pivotal committee of the Federal Reserve, the country’s central bank.

The Fed is notoriously protective of its deliberations, since they routinely move markets worldwide, and is mindful of the immense advantage that knowledge of coming decisions can give to those in the know.

In this instance, according to an account from Pro Publica, Medley reported that the Fed’s Open Markets Committee had decided in September to extend its stimulus program, and would buy $45 billion per month in Treasury bonds and mortgage-backed securities for some months to come.

That was big news, and the day after Medley’s account came out the Fed, as scheduled, released minutes of the committee meeting, which confirmed the report. That caused bond prices to fall and yields to rise. Advance knowledge of what the minutes would say was, it’s safe to assume, extremely advantageous.

Fed officials launched an internal probe, and by last month the Commodity Futures Trading Commission, a regulatory agency, had started an insider-trading investigation while federal prosecutors in Manhattan were conducting a Continue reading “Suppose an inside scoop of official secrets gives some market players an unfair advantage—is that a good reason to muzzle the media?”