The Federal Reserve does not want to release details about the financial institutions that have received more than $1 trillion in loans through about a dozen emergency programs.
To stop the release, the Fed asked U.S. District Judge Loretta Preska to delay enforcement of her August 24 ruling mandating the release of the identities and asked for a stay in her court yesterday. Preska ordered the release by August 31 in the case filed by Bloomberg on November 7, 2008, under the Freedom of Information Act.
The Clearing House Association, which includes ABN Amro, Bank of America (BAC), Bank of New York Mellon (BK), Citigroup (C), Deutsche Bank (DB), HSBC Holdings (HBC), JPMorgan Chase (JPM), UBS (UBS), U.S. Bancorp (USB) and Wells Fargo (WFC) filed a declaration with the request for the stay. In its declaration Norman Nelson, vice president and general counsel for the association, said, "Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences flow. Our members have accessed the discount window with the understanding that the Fed will not disclose information about their borrowing, especially their identity."
Do any of these banks really think the public will be surprised they accessed the Fed's discount window for funds to shore up their capital? I seriously doubt it. What we're dealing with is the public's right to know where more than $1 trillion dollars have gone from the country's central bank. Bloomberg, The Washington Post and other news outlets have rightfully sought to inform the public by filing lawsuits asking for release of the information.
Judge Preska obviously rejected the Fed's arguments on August 24 when she ruled in favor of Bloomberg. The Fed argued that day that the records should remain private because they are trade secrets and would scare customers into pulling their deposits. Senator Bernie Sanders of Vermont said in an email reaction to the Fed's argument "The time has come for the Fed to stop stonewalling and hand this information over to the public."
I applaud Bloomberg and all other news outlets that have decided there's too much secrecy in how the Fed is helping banks. The public's right to know outweighs the banks needs for secrecy.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to the Federal Reserve.