As Sunshine Week comes to a close, the U.S. Court of Appeals in Manhattan has just issued a ruling that could add a much-needed dose of transparency to the Federal Reserve’s bailout programs.
Bloomberg is reporting that the Court has ruled that the Federal Reserve Board must comply with a Freedom Of Information Act (FOIA) request seeking information on the banks that received some $2 trillion in emergency loans.
In response to the FOIA request—which was filed by Bloomberg News and sought detailed, transaction-level information on the recipients and terms of the loans—the Fed withheld thousands of pages worth of information under the b(4) and b(5) FOIA exemptions, which protect against the disclosure of trade secrets and inter-agency or intra-agency communications. As Fed Board Secretary Jennifer Johnson explained to Bloomberg reporter Mark Pittman, many banks opposed the release of these records because it could signal their weakness and reveal sensitive information about the value of their riskier assets. Bloomberg then sued to compel the disclosure of the documents, and to force the Fed to search for additional records at the Federal Reserve Bank of New York that would be responsive to the request.
In August 2009, U.S. District Judge Loretta Preska ruled that the Fed improperly withheld many of its records, rejecting the argument that disclosing the names of the loan recipients would somehow cast a stigma on these firms:
"The Board would seemingly sweep within the scope of Exemption 4 all information about borrowers that anyone throughout the entire marketplace might consider to be negative. The Exemption cannot stand such inflation...The Board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed...Conjecture, without evidence of imminent harm, simply fails to meet the Board’s burden of showing that Exemption 4 applies." (emphasis in original)
In today’s opinion, U.S. Circuit Chief Judge Dennis Jacobs wrote that FOIA “sets forth no basis for the exemption the Board asks us to read into it,” and that “if the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”
POGO believes there’s a strong public interest in releasing these records, as taxpayers have a right to learn more about the significant and controversial role the Fed played in the government’s bailout efforts, and we applaud the appeals court for rejecting the Fed’s attempts to keep these records shrouded in secrecy.
-- Michael Smallberg