Bloomberg wins Freedom of Information lawsuit against Fed

By Edward Harrison On Aug 24, 2009

The Federal Reserve must make public reports about recipients of emergency loans from U.S. taxpayers under programs created to address the financial crisis, a federal judge ruled.

The case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595. I have written a number of posts on this topic, following the case since November of last year.

Reuters reported that Chief District Judge Loretta Preska of the federal court in Manhattan wrote a 47-page opinion today which said the Federal Reserve failed to demonstrate that disclosure would cause banks to suffer “imminent competitive harm” due to their using the Fed’s lending programs. "The board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed. Conjecture, without evidence of imminent harm, simply fails to meet the board’s burden,” she said in her opinion.

Monday’s ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades. The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co. After the Fed resisted the request, Bloomberg sued to compel disclosure. Preska concluded the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search," she wrote. FOIA obliges federal agencies to make government documents available to the public, subject to various exemptions. Bloomberg News and the Fed did not immediately return requests for comment.

Consider this a major win for transparency and the rule of law. The Federal Reserve has been acting in the shadows in concert with the executive branch without proper oversight from elected officials in Congress. Had they stuck to their dual mandate concerning economic growth and inflation most people would not have become alarmed. However the Federal Reserve has been taking on a quasi-fiscal role that demands much more transparency. And now we are going to get it.