China Targeted Federal Reserve System to Build Informant Network and Access Data, Senate Probe Finds

China tried to build a network of informants inside the Federal Reserve system, at one point threatening to imprison a Fed economist during a trip to Shanghai unless he agreed to provide nonpublic economic data, a congressional investigation found.

The investigation by Republican staff members of the Senate’s Committee on Homeland Security and Governmental Affairs found that Fed employees were offered contracts with Chinese talent-recruitment programs , which often include cash payments, and asked to provide information on the U.S. economy, interest-rate changes and policies, according to a report of the findings released Tuesday.

In the case of the economist, the report said, Chinese officials in 2019 detained and tried to coerce him to share data and information on U.S. government policies, including on tariffs while the U.S. and China were in the midst of a trade war.

The report doesn’t say whether any sensitive information was compromised in what it said has been a decadelong effort that began around 2013. Access to such information could provide valuable insights given the Fed’s extensive analysis of U.S. economic activity, its oversight of the U.S. financial system, and the setting of interest-rate policy.

The Republican-led investigation said the Fed failed to mount an adequate response. The report’s findings show “a sustained effort by China, over more than a decade, to gain influence over the Federal Reserve and a failure by the Federal Reserve to combat this threat effectively.”

Fed Chairman Jerome Powell strongly disputed the report’s findings and called its characterizations of some employees unfair. “Because we understand that some actors aim to exploit any vulnerabilities, our processes, controls, and technology are robust and updated regularly. We respectfully reject any suggestions to the contrary,” he wrote in a letter to Sen. Rob Portman of Ohio

AS USUAL, China DENIES this.

China criticized the Senate Republicans’ report, with a Chinese embassy spokesman in Washington citing the “Cold War zero-sum thinking” of some members of Congress. “The cooperation between China and the U.S. in economic, financial and other fields is open and aboveboard, which has played an important role in enhancing mutual understanding and mutual trust between the two countries,” said the spokesman, Liu Pengyu.

FROM ZERO HEDGE :

A former Fed investigation identified 13 people of interest beginning in 2015. The Congressional investigation relied "heavily" on the Fed's findings for their report. One economist in the Fed system, who was fired for violating rules, was found to be close to a former employee who was alleged to have attempted to recruit members for the espionage network.

That former "expressed a desire to maintain an inside information sharing relationship" and had ties to Chinese government-backed talent recruitment programs.

Another individual once gave "economic modeling code to a Chinese university with ties to the People’s Bank of China," the report says. Though, the Fed is wrong so often, maybe it was a disinformation campaign on our part?

Yet another employee "attempted to transfer large volumes of data from the Fed to an external site on at least two occasions," the Journal wrote.

In a letter to Sen. Rob Portman of Ohio, the committee’s top Republican, Jerome Powell wrote that he would be concerned about "any supportable allegation of wrongdoing, whatever the source," before adding: "In contrast, we are deeply troubled by what we believe to be the report’s unfair, unsubstantiated, and unverified insinuations about particular staff members.”

Portman replied that he hoped the investigation “wakes the Fed up to the broad threat from China to our monetary policy."

"The risk is clear,” he wrote.

Chinese officials in 2019 detained a Fed economist and tried to coerce him to share data and information on U.S. government policies: WSJ

He was then promptly released when Beijing discovered nobody at the Fed has any clue what's going on? — zerohedge (@zerohedge) July 26, 2022

The Federal Reserve was meant to be exactly that - a federal reserve in case of market failure (think 1907 or the TARPS era).

It was not meant to be a year-after-year system to cheat savers out of a fair rate of return on their money via interest.

A fair rate of interest would at least maintain the buying power of the saver’s money.

“A fair rate of interest would at least maintain the buying power of the saver’s money.”

The central bankers are raising rates, which is signaling an end to the cheap money debauchery of speculative stupidity that has gone on since the 2008-2009 time period.

The bankers aren’t bluffing and I approve of their current monetary position.

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