In a rare victory for common sense, the Supreme Court has rejected appeals by banks and the Fed that disclosure of the emergency loans by the Fed to various banks in 2008 were “trade secretes”. The court gave the Fed 5 days to release the information.
Please consider Fed Must Release Loan Data as High Court Rejects Appeal
The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.
“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.
The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.
“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.
Under the trial judge’s order, the Fed must reveal 231 pages of documents related to borrowers in April and May 2008, along with loan amounts. News Corp. (NWSA)’s Fox News is pressing a bid for 6,186 pages of similar information on loans made from August 2007 to November 2008.
The records were originally requested under FOIA, which allows citizens access to government papers, by the late Bloomberg News reporter Mark Pittman.
As a financial crisis developed in 2007, “The Federal Reserve forgot that it is the central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny,” said Matthew Winkler, editor in chief of Bloomberg News. “The Fed must be accountable to Congress, especially in disclosing what it does with the people’s money.”
The Clearing House Association contended that Bloomberg is seeking an unprecedented disclosure that might dissuade banks from accepting emergency loans in the future.
Bloomberg initially requested similar information for aid recipients under three other Fed emergency programs. The central bank released details for those facilities and others in December, after Congress required disclosure through the Dodd- Frank law.
The New York-based Clearing House Association, which has processed payments among banks since 1853, includes Bank of America NA, Bank of New York Mellon, Citibank NA, Deutsche Bank Trust Co. Americas, HSBC Bank USA NA, JPMorgan Chase Bank NA, U.S. Bank NA and Wells Fargo Bank NA.
In trying to shield the documents from disclosure, the Clearing House invoked a FOIA exemption that covers trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
The cases are Clearing House Association v. Bloomberg, 10- 543, and Clearing House Association v. Fox News Network, 10-660.
Information-Wise, a Big Yawn
The argument that information represents “trade secrets” is of course preposterous, as is the idea that “disclosure that might dissuade banks from accepting emergency loans in the future”. If banks need money to survive, they will take it.
We will know soon enough, but I expect the information to be a big yawn. We will see some loan amounts and names but everyone knows the names anyway. Perhaps there will be some excitement over loans to foreign banks.
Important Step in the Right Direction
Whatever excitement there is, will last all of a day. However, this was an important step in the right direction, that removes some unwarranted secrecy at the Fed.
The Fed hides behind a cloak of secrecy, doing what they want, when they want, with no disclosure, and no accountability to anyone.
Five Steps to Eliminate the Fed
The first step is a full disclosure of what happened. The second step is a full and complete audit. The third step is a plan to phase out the the Fed. The fourth step is Congressional approval of that plan. The fifth and final step is removal of the Fed itself.
This first step was a very small one actually, but every trip begins with a single step. It will take years to get rid of the Fed. I am hoping I live to see the day it happens.
Mike “Mish” Shedlock