Bloomberg sues to get list of banks borrowing from the Fed
Should the Federal Reserve have to disclose the names of the banks and other companies that are getting special Fed financial help?
Bloomberg News thinks so. And because the Fed won’t tell, the news organization now is suing for the information.
From a Bloomberg story today:
The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.
Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.
The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.
Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.
The Fed, of course, can argue that it has a good reason for keeping borrowers’ identities secret: It doesn’t want to risk another banking panic by giving stock traders and depositors a list of institutions that would immediately be seen as the weakest links in the financial chain. No regulator wants to force a failure if there's a decent chance an institution could survive, with time.
From the Bloomberg story:
Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group.
"You have to balance the need for transparency with protecting the public interest," Talbott said. "Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system."