Taxi Study Finds Increase in Trips Between Fed, Banks Around FOMC Meetings
By Michael S. Derby
A new study has found a jump in New York City taxi cab activity between the Federal Reserve Bank of New York and major Wall Street banks around the time of central bank policy meetings, and the study's author says the findings suggest an increase in informal communications between Fed employees and individuals in the private sector could be occurring.
The New York Fed strenuously disputed the study's assertions.
The study was conducted by University of Chicago Booth School of Business Ph.D. candidate David Finer, 33 years old, and made available by the school. His research is in a working paper that will be made public Monday.
Mr. Finer used government-provided GPS coordinates, vehicle information and other travel data to track taxi traffic between the addresses of the New York Fed and major banks. His research pointed to increased traffic between the destinations around lunch and late evening hours, which suggested informal meetings were taking place, Mr. Finer wrote in his paper. He found elevated numbers of rides around Federal Open Market Committee meetings, with most of them coming after the gathering.
"The paper does not say anything illegal is happening," Mr. Finer said in an interview. But "the pattern of interactions suggest these meetings are happening, and there's the potential for information to be shared" between Fed employees and those in the private sector at these types of gatherings, he said.
A spokesman for the New York Fed said the paper's claims were fundamentally flawed.
"Many of the working paper's inferences are flawed and misleading," the bank spokesman said. "It is simply not credible to imply that an increase of a few taxi rides by unknown passengers between densely populated areas of the city -- business, transportation and hospitality hubs -- increased the risk of inappropriate communication," he said, noting the Fed has strong policies governing how its staff interact with financial institutions.
Mr. Finer's analysis rests on yellow-cab data tracking rides between 2009 and 2014 provided by the New York City taxi regulators. The data doesn't include information from ride-sharing companies or from the other types of hired cars.
Mr. Finer writes that "highly statistically significant patterns in New York City yellow taxi rides suggest that opportunities for information flow between individuals present at the New York Fed and individuals present at major commercial banks increase around" meetings of the interest-rate setting FOMC.
"Their geography, timing and passenger counts are consistent with an increase in planned meetings causally linked to the incidence of monetary-policy activities," he wrote. "I find highly statistically significant evidence of increases in meetings at the New York Fed late at night and in off-site meetings during typical lunch hours," which is suggestive of "informal or discreet communication."
The report comes at a time of heightened scrutiny of how Fed officials interact with the public about sensitive information. Last year, then Richmond Fed President Jeffrey Lacker stepped down after revealing he had accidentally confirmed sensitive information about a Fed bond-buying program to a financial information firm and then failed to report the disclosure. That came as part of a broader probe into whether there had been a leak in 2012 about changes in the bond-buying effort.
Write to Michael S. Derby at email@example.com
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March 05, 2018 00:16 ET (05:16 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.