How the Fed and the Treasury Stonewalled Mark Pittman to His Dying Breath

Originally published at www.CounterPunch.org.

by Pam Martens

On the President’s first day in office on January 21, 2009, he issued an Open Government memo promising the American people a new era of transparency. On March 19, 2009, under the President’s orders, the Attorney General’s office issued detailed guidelines on how Federal agencies were to respond going forward to Freedom of Information Act (FOIA) requests.  The guidelines instructed the agencies as follows:

“The key frame of reference for this new mind set is the purpose behind the FOIA. The statute is designed to open agency activity to the light of day. As the Supreme Court has declared: ‘FOIA is often explained as a means for citizens to know what their Government is up to.’ NARA v. Favish, 541 U.S. 157, 171 (2004) (quoting U.S. Dep’t of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 773 (1989)…The President’s FOIA Memoranda directly links transparency with accountability which, in turn, is a requirement of a democracy. The President recognized the FOIA as ‘the most prominent expression of a profound national commitment to ensuring open Government.’  Agency personnel, therefore, should keep the purpose of the FOIA — ensuring an open Government — foremost in their mind.” 

It pains me to inform you, Mr. President, but the Treasury Department, Board of Governors of the Federal Reserve, and Securities and Exchange Commission (the trio that has been variously distracted minting trillions in currency, trading cash for trash with Wall Street, surfing for porn, or mishandling multiple voluminous tips on Bernie Madoff’s Ponzi scheme) have misplaced your memo or, as many suspect, take their marching orders not from you but from Wall Street — perhaps because they perceive that this is where you take your orders too.

On October 6, 2010, I filed three FOIA requests with the Securities and Exchange Commission (SEC).  I had come by information that the official government report on the stock market’s “Flash Crash” of May 6, 2010 was materially wrong and I wanted to buttress my investigative report to the public with documents the SEC had obtained or compiled in conducting its investigation.

I followed the SEC’s FOIA instructions and emailed the requests to [email protected] as instructed by the web site, asking for a small amount of very specific information.  (You should know, Mr. President, that you may need a technology overhaul, along with a personnel overhaul at the SEC because, according to their written response, it took six days to receive my email.  The SEC emailed me as follows on October 12: “This letter is an acknowledgment of your FOIA Request dated October 06, 2010, and received in this office on October 12, 2010, regarding Flash Crash of May 06…” A cynical person might entertain the idea that this is a standard response to postal requests and the SEC didn’t notice that my request came in via email.)

According to Congress, the SEC was required, under the 1996 amendments to the FOIA,

”to  determine within 20 days (excluding Saturdays, Sundays, and legal holidays) after the receipt of a request whether to comply with the request.  The actual disclosure of documents is required to follow promptly thereafter. If a request is denied in whole or in part, the agency must tell the requester the reasons for the denial. The agency must also tell the requester that there is a right to appeal any adverse determination to the head of the agency or his or her designee.  The FOIA permits an agency to extend the time limits up to 10 days in unusual circumstances. These circumstances include the need to collect records from remote locations, review large numbers of records, and consult with other agencies. The agency is supposed to notify the requester whenever an extension is invoked.”

My response was not answered within 20 business days and I was not informed it would be delayed.  On the 24th business day, I was informed by three separate emails that all three of my requests were denied in their entirety.  In reviewing the transmission detail on each email, it took seconds for the SEC’s outgoing emails to reach me, whereas the SEC would have me believe that their incoming emails take six days.

One request was denied on the basis of FOIA exemption number 8.  Congress defines that exemption as follows: “The eighth exemption protects information that is contained in or related to examination, operating, or condition reports prepared by or for a bank supervisory agency such as the Federal Deposit Insurance Corporation, the Federal Reserve, or similar agencies.”  The SEC supervises and regulates broker-dealers and securities trading, not banks.  Moreover, I was seeking documents related to a specific stock market event, the Flash Crash of May 6, 2010, not a report or examination of a bank’s condition. 

The second request was denied on the basis of FOIA exemption number 5.  Congress defines that exemption as applying to internal government documents. 

“An example is a letter from one government department to another about a joint decision that has not yet been made. Another example is a memorandum from an agency employee to his supervisor
describing options for conducting the agency’s business.  The purpose of the fifth exemption is to safeguard the deliberative policymaking process of government…For example, the exemption protects the policymaking process, but it does not protect purely factual information…Protection for the decision making process is appropriate only for the period while decisions are being made. Thus, the fifth exemption has been held to distinguish between documents that are pre-decisional and therefore may be protected, and those which are post-decisional and therefore not subject to protection.”

My request was for factual information and not policy deliberations.  Since the official report on the May 6, 2010 Flash Crash was released on October 1, 2010 and my request was made on October 6, 2010, all documents sought would have been post-decisional and not subject to protection. 

My third request was denied on the basis that the SEC did not have the information but their letter referenced only half the information I sought and was silent on the other half.

A brief flash of a movie scene came to mind as I reflected on the government’s maniacal refusals to turn over Wall Street documents since the financial crisis began.  In “The Rainmaker,” based on the John Grisham novel, young Donny Ray dies of leukemia because the evil insurance company, Great Benefit, won’t approve a bone marrow transplant. After repeatedly denying the mother’s treatment requests for her dying son, the company sends her a final denial letter calling her “stupid, stupid, stupid” for failing to just go away.  As it turns out, wearing the requester down with denials is a formalized practice for corporate benefit; there is no “Great Benefit” ever intended for the public.

The movie flashback reminded me of Mark Pittman’s FOIA battle. Pittman was a revered and trusted Bloomberg News financial reporter who died on November 25, 2009 at age 52 after his government essentially told him they thought he was “stupid, stupid, stupid” for not just going away.  The government stonewalled him to his last breath. 

Pittman’s legacy is now memorialized in Bloomberg v. Board of Governors of the Federal Reserve System which was decided in Bloomberg’s favor by the Second Circuit Court of Appeals on March 19, 2010.  Pittman had asked the Federal Reserve Board, under a FOIA request in April and May of 2008, for details of four lending programs, including the borrowers’ names and the amounts borrowed.  The programs were the Discount Window, the Primary Dealer Credit Facility, the Term Securities Lending Facility, and the Term Auction Facility. Pittman’s curiosity was piqued by the astronomical amount of borrowing taking place at the Fed by Wall Street banks during the crisis in 2008.  After averaging approximately $250 million a week in prior years, lending at the Fed’s Discount Window spiraled to over $100 billion in October 2008.

By law, the Federal Reserve had 20 business days to make a determination on the FOIA request.  Instead, according to the Bloomberg lawsuit: On June 19, 2008, the Fed invoked its right to extend the response time to July 3, 2008.  On July 8, 2008, the Fed called Bloomberg News to say it was processing the request.  The Fed called Bloomberg again on August 15, 2008, wherein Alison Thro, Senior Counsel and another employee, Pam Wilson, informed the business wire service that their request was going to be denied by the end of September 2008.  No further communication came, including the denial. 

On November 7, 2008, Bloomberg News filed a lawsuit in the U.S. District Court for the Southern District of New York, charging that: “…the Fed has vastly expanded its lending programs to private financial institutions.  To obtain access to this public money and to safeguard the taxpayers’ interests, borrowers are required to post collateral.  Despite the manifest public interest in such matters, however, none of the programs themselves make reference to any public disclosure of the posted collateral or of the Fed’s methods in valuing it.  Thus, while the taxpayers are the ultimate counterparty for the collateral, they have not been given any information regarding the kind of collateral received, how it was valued, or by whom.”

It’s now two years later, Bloomberg has won at both the U.S. District Court and the Second Circuit Appeals Court and the information is still being withheld. While the Federal Reserve Board is not appealing to the U.S. Supreme Court, many of the same Wall Street banks the taxpayers bailed out, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, are appealing to stop the release of the information through a consortium called The Clearing House Association LLC.  At least one person doesn’t believe that appeal presents a solid basis to withhold the information.  Matthew Winkler, Editor in Chief at Bloomberg News, wrote in an October 28, 2010 OpEd in the Wall Street Journal: “Now that the Fed is no longer pursuing the case, it may be able to release the information Bloomberg seeks at any time. We call on it to do so.”

Pittman’s battle with the Fed has been widely publicized.  Less known is the specious handling of his FOIA request by the U.S. Treasury.

On Jan. 28, 2009, Pittman filed a FOIA with the U.S. Treasury asking it to identify the $301 billion in securities owned by Citigroup that the government had agreed to guarantee to help shore up the troubled bank and to provide details of any contracts the Treasury had with outside firms hired to calculate the assets’ values. Pittman died 10 months later still waiting for a response.

According to a Bloomberg News story reported by Bob Ivry on October 25th of this year, it took the Treasury over 20 months to finally respond, after allowing Citigroup to have input in what was to be disclosed.  “Treasury officials responded with 560 pages of printed-out e-mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as ‘Did you just try to call me?’… None of the documents answers Pittman’s request for ‘records sufficient to show the names of the relevant securities’ or the dates and terms of the guarantees.”  The headline of the article read “Treasury Shielding Citigroup With FOIA Deletions.”  A subhead might have been “Citigroup Calls the Shots at Treasury.”

What does  Winkler (and this writer) think the withheld facts might show?  In Winkler’s OpEd of October 28 he noted: “Such disclosure would show whether the central bank may have violated the law by lending to any insolvent banks for extended periods.”

Did Pittman have any particular bank in mind when he filed his FOIAs?  Well, he did want to know about that $301 billion guarantee to Citigroup. 

I commend Pittman and  Winkler for not just going away and I share their concerns.  In my CounterPunch column of November 24, 2008, titled “The Rise and Fall of Citigroup,” I noted that

“As of last Friday’s close, Citigroup had $2 trillion in ‘assets’ and $20.5 billion in stock market value, strongly suggesting the term ‘assets’ is a misnomer on Wall Street. Late last night the U.S. government agreed to dump hundreds of billions more into this black hole without any survival plan required of the company as demanded of the auto makers: apparently if you make those four wheel machines that get us to work you’re suspect; if you manufacture losses in unintelligible derivatives, you’re good to go…[Citigroup’s] stock lost 60 per cent last week and 87 per cent this year.  The company’s market value has now fallen from more than $250 billion in 2006 to $20.5 billion on Friday, November 21, 2008.” 

At that point in time, Citigroup’s market value was $4.5 billion less than the company owed taxpayers from the U.S. Treasury’s bailout program.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article.  She writes on public interest issues from New Hampshire.  She can be reached at [email protected]

Also see Bloomberg News sues the Fed under Freedom of Information Act from Nov 2008.