Fed Loses Bid for Review of Bailout Disclosure Ruling
An appeals court refused to reconsider a decision compelling the Federal Reserve Board to release documents identifying banks that might have failed without the U.S. government bailout.
The full U.S. Court of Appeals in New York, in a docket entry dated Aug. 20, denied a May 4 request by the Fed to review a three-judge panel’s unanimous March 19 decision requiring the agency to release records of the unprecedented $2 trillion U.S. loan program begun primarily after the 2008 collapse of Bear Stearns Cos.
Unless the court stays its decision, the Fed will have seven days to disclose the documents. In the event of a stay, the central bank and the Clearing House Association LLC, an organization of 20 commercial banks that joined the Fed in defense of the lawsuit, will have 90 days to petition the Supreme Court to consider their appeal. The Clearing House has already said it will ask the high court to rule on the case.
“We are reviewing the decision and considering our options for appeal,” David Skidmore, a Fed spokesman, said.
At issue are 231 “term sheets” documenting Fed loans to financial firms during 2008. The records, which include the banks’ names, the amounts borrowed and the collateral posted in return, were originally requested by late Bloomberg News reporter Mark Pittman through the Freedom of Information Act, which allows citizens access to government papers.
The March appeals court ruling upheld a decision of a lower-court judge in Manhattan who in August 2009 ordered that the information be released.
The Fed argued in the case, which was brought by Bloomberg LP, the parent of Bloomberg News, that disclosure of the documents threatens to stigmatize borrowers and cause them “severe and irreparable competitive injury,” discouraging banks in distress from seeking help. The appeals court panel rejected that argument.
“The decision is of exceptional importance,” the Fed’s lawyers wrote in a legal brief on May 4 in which they asked the circuit court to reconsider the decision. “The real-world consequence of the panel’s decision will be serious, perhaps irreparable harm to the institutional borrowers whose information will be revealed.”
The 157-year-old New York-based Clearing House Payments Co., which processes transactions among banks, is owned by its 20 members. They include JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Bank of New York Mellon Corp., Deutsche Bank AG, HSBC Holdings Plc, PNC Financial Services Group Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.
Clearing House Action
The Clearing House Association, a lobbying group with the same members, joined the lawsuit in September 2009, after the initial ruling against the central bank in federal court in Manhattan.
Iya Davidson, a spokeswoman for the Clearing House, didn’t return calls seeking comment.
The amount the Fed and the U.S. government lent, spent and guaranteed to stem the recession and rescue the banking system peaked in March 2009 at $12.8 trillion, most of it following the September 2008 bankruptcy of Lehman Brothers Holdings Inc.
Fox News, a unit of New York-based News Corp., also sued the Fed to force the release of loan documents for transactions in 2008 and 2009.
The New York Times Co., the Associated Press and Dow Jones & Co., publisher of the Wall Street Journal, are among media companies that have signed up as friends of the court in support of Bloomberg.
Argument for Disclosure
“The public interest in disclosure in this case could hardly be greater,” the friends of the court said in their letter. Despite the Fed’s “massive outlay, the public knows little about who has received these funds or the terms of their loans. Without this information, it is impossible to monitor the Board’s actions, and FOIA’s core purpose is defeated.”
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).