[Infowarrior] - Fed Refuses to Release Bank Lending Data

[Richard Forno]

Fed Refuses to Release Bank Lending Data, Insists on Secrecy

By Mark Pittman

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aG0_2ZIA96TI

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).

To contact the reporters on this story: Mark Pittman in New York at mpittman at bloomberg.net 
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Last Updated: March 5, 2009 00:01 EST