Rationalizing cover-ups and AIG bailouts at the Fed

By Edward Harrison On Jan 25, 2010

This comes from Ryan Chittum of the Columbia Journalism Review:

Whatever Tim Geithner’s New York Fed was trying to hide in the AIG backdoor bailout was so volatile it was deemed worthy of national-security-like classification, and the Fed reacted to media FOIA requests for information by withholding more information.

Reuters, gets the scoop on emails that detail the discussion between the Fed, AIG, and the SEC.

The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG’s confidentiality request.

The SEC had also agreed that if it determined the document should not be made public, it would be stored “in a special area where national security related files are kept,” the lawyer wrote.

Hello! They really didn’t want that information out there. Which, of course, means we really need that information out there.

But what particularly has The Audit’s interest is the media angle. Reporter Matthew Goldstein drops some interesting information in the last paragraph of his story on that:

The emails also discuss that BusinessWeek magazine had submitted a Freedom of Information Act request for the document and the confidential treatment request was a way of dealing with that and other possible requests by the media for the document.

I asked Goldstein for more information on this. It turns out Goldstein himself was the BusinessWeek reporter who filed the FOIA. He passed along some emails showing the Fed reacting to the FOIA request.

They contain a revealing look at your government covering up public information—and in reaction to a request under the law that gives the public access to its information! Stunning.

In one email, the Federal Reserve’s James P. Bergin, an assistant vice president, is caught explaining the extralegal rationale for hiding information about the backdoor bailout (emphasis mine):

Well, I think that Alex (Latorre of the New York Fed) had anticipated the desire at one point to have the whole schedule be confidential. It’s less of a legally motivated worry than a worry that including the column headings could further incite FOIA requests or litigation—that if people know the counterparty names and amounts are indeed on this schedule, they will be all the more likely to want to request it.

This apparently was in reaction to Goldstein’s FOIA request, which was denied. To reiterate, the Geithner New York Fed reacted to a FOIA not by releasing the information, but by making more information secret—in order to prevent other meddlesome reporters (or lawyers) from filing FOIAs!

This is looking like a Watergate-style mess. I suspect the more we learn, the more we will want to stop the cover-up. In the case of Watergate, it was the Supreme Court which brought the whole charade to an end. Question: do we have an ‘activist’ Supreme Court which will overturn previous legal victories in the quest to know more (see Bloomberg wins Freedom of Information lawsuit against Fed)?

The United States has lost any beacon-on-the-hill appeal it once had. After the torture at Abu Ghraib, the rendition, the indefinite detention of enemy combatants at Guantanamo Bay, it was clear that the United States would resort to all means necessary for its policy agenda.

Now, the near-death of the global financial system has further weakened America as doubts have grown about the American model of capitalism. But, you can’t help but think that crony capitalism runs rampant in the U.S. This can only further erode the American exceptionalism to which our President and his predecessors have frequently pointed.

When I detailed how skeptical CW readers were about the recent populist about-face by the Obama Administration I got one interesting reaction in the comments:

Martin Luther began protestant religion because he could see how ugly it was for the Vatican to receive money from sinners and criminals for abolishment of their sins. Criminals could pay pre crime money to receive blessing and insure themselves a place in heaven.

I’m sure this raises a smile with most people.

The American Lobby group is that sinner and the politicians who accept any kind of influence from these lobby groups are the Vatican.

The question is, if Obama became president through this kind of influence, he won’t be able to bite the hand that feeds him.

Anyone over forty soon comes to understand Cinderella Stories truly are the fiction of Walt Disney and in the real world, it all works on back room deals and ol’ boy networks.

If anyone was into genealogy, they’d find out how many cousins use nepotism to advance themselves and their loyal relatives.

Nothing’s going to change and the tax payer is going to continue to get leeched by those who hold the keys to abusing the system.

It’s the American Way.

Greed is the fuel the country runs on.

No different than black market Russia – just a little more lip stick.

The disillusionment is there and will be there for some time to come.