Fed Refuses to Release Bank Lending Data, Insists on Secrecy
By Mark Pittman
http://www.bloomberg.com/apps/news?pid=20601087&sid=aG0_2ZIA96TI&refer=home
March 5 (Bloomberg) -- The Federal Reserve Board of Governors receives daily reports on loans to banks and securities firms, the institution said in response to a Freedom of Information Act lawsuit filed by Bloomberg News.
The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.
The bank provides “select members and staff of the Board of Governors with daily and weekly reports” on Primary Dealer Credit Facility borrowing, said Susan E. McLaughlin, a senior vice president in the markets group of the Federal Reserve Bank of New York in a deposition for the Fed. The documents “include the names of the primary dealers that have borrowed from the PDCF, individual loan amounts, composition of securities pledged and rates for specific loans.”
The Board of Governors contends that it’s separate from its member banks, including the Federal Reserve Bank of New York which runs the lending programs. Most documents relevant to the Bloomberg suit are at the Federal Reserve Bank of New York, which the Fed contends isn’t subject to FOIA law. The Board of Governors has 231 pages of documents, which it is denying access to under an exemption under trade secrets.
“I would assume that information would be shared by the Fed and the New York Fed,” said U.S. Representative Scott Garrett, a New Jersey Republican. “At some point, the demand for transparency is paramount to any demand that they have for secrecy.”
Bloomberg sued Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs.
‘Financial Crisis’
The Bloomberg lawsuit said 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.”
The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP.
Total Fed lending exceeded $2 trillion for the first time Nov. 6 after rising by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA. Fed lending as of Feb. 25 was $1.92 billion.
Posted Collateral
Bloomberg News, a unit of New York-based Bloomberg LP, on May 21 asked the Fed to provide data on collateral posted from April 4 to May 20. The central bank said June 19 that it needed until July 3 to search documents and determine whether it would make them public. Bloomberg didn’t receive a formal response that would let it file an appeal within the legal time limit.
On Oct. 25, Bloomberg filed another request, expanding the range of when the collateral was posted. It sued Nov. 7.
In response to Bloomberg’s request, the Fed said the U.S. is facing “an unprecedented crisis” in which “loss in confidence in and between financial institutions can occur with lightning speed and devastating effects.”
Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson said in September they would meet congressional demands for transparency in a $700 billion bailout of the banking system.
The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg lawsuit, filed in New York, doesn’t seek money damages.
Bank Opposition
Banks oppose any release of information because that might signal weakness and spur short-selling or a run by depositors, the Fed argued in its response.
“You could make everything a trade secret,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.
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).