Jan. 29 (Bloomberg) -- U.S. government guarantees on securities totaling $419 billion for bank bailouts provide an early test of President Barack Obama’s pledge to be open with taxpayers about what they have at risk in the credit crisis.

Bloomberg News asked the Treasury Department Jan. 26 to disclose what securities it backed over the past two months in a second round of actions to prop up Bank of America Corp. and Citigroup Inc. Department spokeswoman Stephanie Cutter said Jan. 27 she would seek an answer. None had been provided by the close of business yesterday.

As Congress debates an $875 billion economic stimulus bill, the guarantees represent a less publicized commitment. The public’s stake has grown along with assurances tying the Treasury to the fate of corporate loans and securities backed by home mortgages, car loans and credit card debt.

“Guarantees are only meaningful if there’s a real chance that someone will have to pay out for them,” said Representative Alan Grayson, a Florida Democrat and a member of the House Financial Services committee that is reviewing the bailouts. “The conception that guarantees cost nothing is a misconception.”

Obama promised a new era of government openness as he took office last week, issuing a statement telling agencies “to adopt a presumption in favor of disclosure” in responding to requests under the Freedom of Information Act. Treasury Secretary Timothy Geithner and Lawrence Summers, head of the National Economic Council, said they would emphasize accountability and transparency in using the second half of a $700 billion bank bailout fund.

New Disclosures

Late yesterday, Geithner’s office put hundreds of pages about the fund on the department’s Web site. They did not include documents describing the guaranteed assets.

Members of Congress from both parties have complained about the Bush administration’s lack of disclosure about the spending of the first $350 billion from the fund.

“We have requested information in the past three months and have been rebuffed by the administration,” said Representative Scott Garrett, a New Jersey Republican and member of the House Financial Services Committee. “President Obama comes down the pike now, and maybe, in a week or a month, we’ll know.”

Last fall, the Federal Reserve declined to identify the recipients of about $2 trillion in emergency loans from U.S. taxpayers or the assets the central bank is accepting as collateral.

Fed Is Sued

Bloomberg News asked for details of the lending on May 21 and filed a federal lawsuit against the Fed Nov. 7 seeking to force disclosure. The loans were made under the terms of what became 11 programs in the midst of the biggest financial crisis since the Great Depression. Arguments in the suit may be heard by a judge as soon as next month, according to the court docket.

Bloomberg filed a FOIA request yesterday for the list of what was covered by the Citigroup and Bank of America guarantees. Bloomberg asked for records on the fees paid by banks to the government, which securities were rejected for guarantees, as well as any contracts for data services and experts to assess the value of the securities.

Under the information law, passed by Congress in 1966, Treasury has 20 working days to respond to Bloomberg’s request. The measure allows nine exemptions, such as trade secrets or national security, for blocking disclosure.

During his confirmation, Geithner, the former president of the Federal Reserve Bank of New York, didn’t directly answer a senator’s request for more information about Maiden Lane LLC, a special-purpose entity that holds assets from the takeover of Bear Stearns Cos. by JPMorgan Chase & Co.

‘Working With You’

“If confirmed, I look forward to working with you and with Chairman Bernanke on ways to respond to your suggestions and concerns,” Geithner said in a written response to the senator, Charles Grassley, an Iowa Republican.

Geithner said it was important to keep details about loans in the portfolio confidential “in order to allow the asset manager the flexibility to manage the assets in a way that maximizes the value of portfolio and mitigates risk of loss to the taxpayer.”

Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press, said “People are trying to get a handle on where the money went and how it’s being used. One would hope that we’ll get to see something. Personally, I want to know what my tax dollars are being used for.”

Consumer confidence fell in January to the lowest since records began in 1967, the Conference Board said Jan. 27. Home prices plunged 18.2 percent in November from a year earlier, the biggest drop since the data was started in 2001, according to the S&P/Case-Shiller index that covers 20 metropolitan areas.

$301 Billion Guarantee

Citigroup’s guarantee package, completed Jan. 16, totals $301 billion. It kicks in after the bank goes through its $9.5 billion in current loan loss reserves and the first $29 billion of losses. The government also gets $1 billion of the bank’s benefit from hedging contracts. The Treasury, the Federal Deposit Insurance Corp. and the Fed then assume 90 percent of losses from those assets.

Citigroup’s guarantees include $191 billion of consumer loans, with $55.2 billion of them second mortgages, according to a Jan. 16 news release from the bank. Securities backed by commercial real estate total $12.4 billion and corporate loans add $13.4 billion.

Citigroup has received $45 billion in cash from selling preferred securities to the government under the Troubled Asset Relief Program.

$118 Billion

Bank of America’s agreement, announced the same day, is similar: $20 billion in cash aid, bringing the total to $45 billion, and $118 billion in asset guarantees. The government said the assets included securities backed by residential and commercial real estate loans and corporate debt and associated derivatives and hedges. Scott Silvestri, a spokesman for the Charlotte, North Carolina-based bank, declined comment.

Merrill Lynch & Co., which was bought by Bank of America, was the underwriter for $49.4 billion in defaulted collateralized debt obligations, the most of any bank, since October 2007, according to data compiled by Standard & Poor’s and Bloomberg.

Merrill was the biggest CDO underwriter from 2005 to 2007, with more than $102 billion, said Sanford C. Bernstein & Co. research analyst Brad Hintz.

Since October 2007, Bank of America underwrote under its name $15.1 billion in failed CDOs, according to S&P and Bloomberg. Banks have so far understated losses on such securities, and “the tsunami is on the horizon,” Hintz said.

‘Going to Be Huge’

Past sales of CDOs valued them at pennies on the dollar. In July, New York-based Merrill sold $30.6 billion of the securities to an affiliate of the Dallas-based investment firm Lone Star Funds for $6.7 billion. Merrill provided financing for about 75 percent of the purchase price, and the sale valued the CDOs at 22 cents on the dollar.

“By June, it’ll become clear that these guarantees are being drawn and they’re going to be huge,” said Christopher Whalen, managing director of Institutional Risk Analytics, a financial-services research company in Torrance, California. “Every day that goes by, Congress figures it out just a little more.”

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net.

Last Updated: January 29, 2009 12:10 EST