Federal Reserve Board fights to keep its secrets
Warns disclosing where money went would cause 'irreparable harm'
The Federal Reserve Board, despite being ordered to disclose to whom it awarded roughly $2 trillion in discount "stimulus" loans, is fighting to keep the information under wraps as a protected "trade secret."
Earlier this week, a U.S. district court judge rejected the Fed's argument that the names of borrowers are exempt from disclosure under the Freedom of Information Act and ordered the board to release the information by Monday, Aug. 31.
The Fed's board of governors, however, has now filed a motion asking the judge to delay enforcement of the order, seeking time to appeal and arguing that disclosing which banks borrowed the funds could lead to a backlash from the banks' customers and stockholders.
"The immediate release of these documents will destroy the board's claims of exemption and right of appellate review," the motion said. "The institutions whose names and information would be disclosed will also suffer irreparable harm."
Bloomberg LP, which sued the Fed on behalf of its Bloomberg News unit for not complying with a FOIA request last year, disagrees.
"Our argument is that the public interest in disclosure outweighs the banks' interest in secrecy," said Thomas Golden, a lawyer who represents Bloomberg.
"What has the Fed got to hide?" said Vermont's Sen. Bernie Sanders in an email reported by Bloomberg. "The time has come for the Fed to stop stonewalling and hand this information over to the public."
When the banking system threatened collapse last year, the Fed invoked its emergency lending powers to make discount loans to banks that now total into the trillions of dollars with the intent of stimulating the economy and preventing further financial meltdown. The names of the borrowing institutions were kept anonymous.
Bloomberg reporter Mark Pittman then filed a FOIA request in an attempt to get the Fed to disclose the borrowing banks and to identify the assets it accepted as collateral.
In return, Federal Reserve Board Secretary Jennifer Johnson sent Pittman a five-page response, telling him the Fed was withholding over 2,000 pages of information deemed protected against disclosure as "trade secrets" and "inter-agency or intra-agency memorandums or letters."
On Nov. 7, 2008, Bloomberg filed a suit seeking full disclosure, and earlier this week, Judge Loretta A. Preska of the U.S. District Court, Southern District of New York, ruled the Fed had until Monday to release the information.
The Fed's motion to delay enforcement of Preska's order argues the board's "ability to effectively manage the current, and any future, financial crisis" would be impaired by releasing the information and "significant harms" could befall the U.S. economy, as disclosure might unsettle shareholders and set off a run on the borrowing banks by worried depositors.
As WND has reported, a majority within the U.S. House called for greater transparency of the Fed by cosigning onto H.R. 1207, the Federal Reserve Transparency Act of 2009. The Act demands an audit of the Fed, a private institution that virtually controls U.S. interest rates, money supply and other economic influences.
U.S. Rep. Ron Paul, R-Texas
"To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have," wrote the bill's sponsor, U.S. Rep. Ron Paul, R-Texas, in a recent Straight Talk commentary. "They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability."
"The tremendous grass-roots and bipartisan support in Congress for H.R. 1207 is an indicator of how mainstream America is fed up with Fed secrecy," said Paul. "I look forward to this issue receiving greater public exposure."
Sen. Jim DeMint, R-S.C., has also pushed in the Senate for greater transparency at the Fed.
"The Federal Reserve will create and disburse trillions of dollars in response to our current financial crisis," DeMint said. "Americans across the nation, regardless of their opinion on the bailout, want to know where the money has gone.
"Allowing the Fed to operate our nation's monetary system in almost complete secrecy leads to abuse, inflation and a lower quality of life," he said, according to Reuters.