Bloomberg News sues the Fed under Freedom of Information Act
For those of you concerned about the Fed’s risky behavior, its ballooning balance sheet, and its acceptance of dodgy collateral, well you may be about to see whether the American democracy can allow this unchecked power to continue without oversight. Bloomberg News has sued the Federal Reserve to force them to reveal what kind of collateral they are accepting in loaning out trillions of dollars to U.S. banks.
The Federal Reserve, a quasi-government body (which strictly speaking is a private corporation in that it is owned by member banks), has been accepting assets of ever more dubious quality in a bid to liquify the U.S. banking system. Moreover, their efforts should be considered highly inflationary and a long-term threat to the value of the U.S. dollar and to the American economy.
The Fed balance sheet is expected to balloon to $3 trillion by the end of the year, up from $900 billion in August — a rise in the Fed’s balance sheet from 6% of GDP to more than 20% of GDP in four months. In Japan, which was known for quantitative easing during its own deflationary crisis, the central bank’s balance sheet rose progressively from 9% of GDP to 29% of GDP. But this was over ten years from 1994 to 2004. At the current pace, the Fed might do in six months what it took ten years to do in Japan. Amazing.
Below is the article from Bloomberg describing their bold lawsuit.
Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.
“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The Fed has lent $1.5 trillion to banks, including Citigroup Inc. and Goldman Sachs Group Inc., through programs such as its discount window, the Primary Dealer Credit Facility and the Term Securities Lending Facility. Collateral is an asset pledged to a lender in the event that a loan payment isn’t made.
The Fed made the loans under 11 programs in response to the biggest financial crisis since the Great Depression. The total doesn’t include an additional $700 billion approved by Congress in a bailout package.
Bloomberg News on May 21 asked the Fed to provide data on the collateral posted between April 4 and May 20. The central bank said on June 19 that it needed until July 3 to search out the documents and determine whether it would make them public.
Bloomberg never received a formal response that would enable it to file an appeal. On Oct. 25, Bloomberg filed another request and has yet to receive a reply.
The Fed staff planned to recommend that Bloomberg’s request be denied under an exemption protecting “confidential commercial information,” according to Alison Thro, the Fed’s FOIA Service Center senior counsel. The Fed in Washington has about 30 pages pertaining to the request, Thro said today before the filing of the suit. The bulk of the documents Bloomberg sought are at the Federal Reserve Bank of New York, which she said isn’t subject to the freedom of information law.
“This type of information is considered highly sensitive, and it would remain so for some time in the future,” Thro said.
The Fed didn’t give Bloomberg a formal response because “it got caught in the vortex of the things going on here,” said Michael O’Rourke, another member of the Fed’s FOIA staff.
The case is Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan).
UPDATE 8 NOV 2008 1000AM ET – I have been doing some searches online for more information about the Federal Reserve and its status as a governmental organization subject to the FOIA. This is what I turned up on their website. Note, that the papers Bloomberg wants are largely at the NY Fed, run by potential Obama Treasury Secretary Tim Geithner, and not in Washington, as the NY Fed performs most open market operations.
The Freedom of Information Act (FOIA), 5 U.S.C. § 552, generally provides that any person has a right of access to federal agency records, unless the records (or any portion of the records) are protected from disclosure by one of FOIA’s nine exemptions or by one of three special law enforcement record exclusions.
The Federal Reserve Board (Board) maintains public and nonpublic records. Public records are available at the Board’sconventional reading room and electronic reading room. A FOIA request is not required to obtain these materials.
The submission of a FOIA request is required to obtain nonpublic records. If you cannot locate the records or information you seek on the Board’s web site, you may wish to file a FOIA request (making a request).
You can find an overview of the Federal Reserve System in The Federal Reserve System: Purposes & Functions, which the Board publishes. Additionally, information about the Federal Reserve System as well as general guidance to consumers on matters related to the Board’s activities can be found at brochures. For information from other federal banking regulators, you may want to search the following web sites:
- Federal Deposit Insurance Corporation (FDIC)
- Office of the Comptroller of the Currency (OCC)
- Office of Thrift Supervision (OTS)
- Federal Financial Institutions Examination Council (FFIEC)
Credit Crisis Timeline
Bloomberg Sues Fed to Force Disclosure of Collateral – Bloomberg
Federal Reserve Board FOIA guidelines – FRB website
Principal FOIA Contacts at Federal Agencies – U.S. Department of Justice website
FOIA Reference Guide – U.S. Department of Justice website