Court to Wrangle Documents From the Fed’s Cold Hands

Bloomberg’s long-standing Freedom of Information Act request for a look at who in the financial system took part in the Fed’s now-secret $2 trillion loan program has been granted by a second court on the basis that there exists no exemption to FOIA rules for the continued economic health of private companies. The Fed is expected to continue its efforts to keep this basic information out of the hands of the Americans who paid for the bailout and the investors who might pull their funds from companies that would have otherwise bailed, in order to protect the companies that were saved from supposed imminent failure.

However, for what one assumes are less than coincidental reasons, several banks who also received publicly disclosed TARP funds joined the Fed in its quixotic quest to keep quiet about who took the Fed’s money too. That group includes ABN Amro Bank, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank, HSBC, JPMorgan Chase, US Bancorp and Wells Fargo. If it seems to the average layperson that these banks have already basically disclosed that they are among the beneficiaries of the Fed’s largess and haven’t suffered any ill effect, that might underscore Bloomberg’s reasoning that the Fed simply doesn’t want to be subject to any oversight rather than that there are major business concerns with the disclosure.

In particular, the appeals court ruled today that the Fed and the banks who mysteriously don’t want the Fed to disclose the banks that accepted their loans during the financial crisis failed to meet the standard set forth by the FOIA for keeping such information secret.

In its opinion today, the appeals court said that the exception applies only if the agency can satisfy a three-part test. The information must be a trade secret or commercial or financial in character; must be obtained from a person; and must be privileged or confidential, according to the opinion.The court said that the information sought by Bloomberg was not “obtained from” the borrowing banks. It rejected an alternative argument the individual Federal Reserve Banks are “persons,” for purposes of the law because they would not suffer the kind of harm required under the “privileged and confidential” requirement of the exemption.

In other words, the Fed argued that the individual Federal Reserve Banks which comprise the Fed are people, not banks, and thus covered by the law. Unlike the Supreme Court in Citizens United v. FEC, the appeals court rejected the idea that the banks are people or that they would be harmed by disclosing to whom they lent money.