Judge orders Fed to release documents detailing bailout loan programs
On the same day the White House leaked President Obama's decision to reappoint Federal Reserve Chairman Ben S. Bernanke, a U.S. judge struck a blow at the central bank's penchant for secrecy in its lending operations.
Manhattan Chief U.S. District Judge Loretta Preska on Monday ruled in favor of a Bloomberg News lawsuit that seeks to force the Fed to disclose details about the emergency lending programs it set up to arrest the financial system breakdown last fall.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders.
The judge said the central bank “improperly withheld agency records” by “conducting an inadequate search” after Bloomberg News reporters filed a request under the Freedom of Information Act. She gave the Fed five days to turn over documents it told the reporters it located, including 231 pages of reports, and said it must look for more at the Federal Reserve Bank of New York, which runs most of the loan programs.
Go here for a complete copy of the ruling.
Bloomberg filed suit last November, arguing that taxpayers should know the terms of the Fed's lending programs because the public became an “involuntary investor” in major financial companies as the Treasury came to their rescue, aided by Fed loans. Citigroup Inc. and American International Group both have been major beneficiaries of special central bank loans.
The Fed's balance sheet has swelled to more than $2 trillion, doubling over the last year.
The judge said the Fed's argument that revealing lending details could destabilize the recipient companies amounted to "conjecture" on the central bank's part, and failed to provide "evidence of imminent harm."
A spokesman for the central bank said the Fed's staff was reviewing the ruling.
The decision could give more impetus to a bipartisan group in the House that is pushing a bill to have the Government Accountability Office audit the Fed's operations. Bernanke has vehemently opposed the idea, asserting that it would lead to the politicization of monetary policy by giving Congress an easy way to second-guess any decision the Fed makes.
-- Tom Petruno