The Federal Reserve must make records about emergency lending to financial institutions public within five days because it failed to convince a judge the documents should be exempt from the Freedom of Information Act.
Manhattan Chief U.S. District Judge Loretta Preska rejected the central bank’s argument that the records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions. The collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression,” according to the lawsuit that led to yesterday’s ruling.
The Fed has refused to name the borrowers, the amounts of loans or the assets put up as collateral under 11 programs, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued Nov. 7 on behalf of its Bloomberg News unit.
“When an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens don’t have the right to know,” said Matthew Winkler, the editor-in-chief of Bloomberg News. “We’re gratified the court is defending the public’s right to know what is being done in the public interest.”
Bloomberg said in the suit U.S. taxpayers need to know the risks behind the central bank’s $2 trillion in lending because the public is an “involuntary investor” in the nation’s banks.
The Federal Reserve’s balance sheet about doubled beginning in September to more than $2 trillion because of a historic attempt to rescue financial institutions. For the week ended Aug. 19, Fed assets rose 2.3 percent to $2.06 trillion as the central bank bought more mortgage-backed securities. Non- government securities were allowed to be purchased by the Fed for the first time.
The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg suit, filed in New York, doesn’t seek money damages.
David Skidmore, a Fed spokesman, said the board’s staff was reviewing the ruling and declined to comment on it at this time.
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).