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).