The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.
The justices today left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. The Clearing House Association LLC, a group of the nation’s largest commercial banks, had asked the Supreme Court to intervene.
“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.
The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.
“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.
Under the trial judge’s order, the Fed must reveal 231 pages of documents related to borrowers in April and May 2008, along with loan amounts. News Corp. (NWSA)’s Fox News is pressing a bid for 6,186 pages of similar information on loans made from August 2007 to November 2008.
The records were originally requested under the Freedom of Information Act, which allows citizens access to government papers, by the late Bloomberg News reporter Mark Pittman.
As a financial crisis developed in 2007, “The Federal Reserve forgot that it is the central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny,” said Matthew Winkler, editor in chief of Bloomberg News. “The Fed must be accountable to Congress, especially in disclosing what it does with the people’s money.”
The Clearing House Association contended that Bloomberg is seeking an unprecedented disclosure that might dissuade banks from accepting emergency loans in the future.
“We are disappointed that the court has declined our petitions, which deal with the protection of highly confidential bank information provided to the Federal Reserve,” the group said in a statement after the high court acted.
A federal trial judge ruled in 2009 that the Fed had to disclose the records in the Bloomberg case, and a New York-based appeals court upheld that ruling.
The Clearing House Association’s chances at getting a Supreme Court hearing suffered a setback when the Obama administration urged the justices not to hear the appeal. The government said the underlying issues had limited practical significance because Congress last year laid out new rules for disclosing Fed loans in the Dodd-Frank law.
“Congress has resolved the question of whether and when the type of information at issue in this case must be disclosed” in the future, the administration said in a brief filed by acting Solicitor General Neal Katyal, President Barack Obama’s top Supreme Court lawyer.
The Fed had previously fought alongside the banks in opposing disclosure. It also sought to join the industry group in seeking high court review, only to be overruled by Katyal, according to court documents.
Justice Elena Kagan, formerly Obama's top Supreme Court lawyer, didn’t take part in the court’s consideration of the appeal. Since joining the court last year, she has disqualified herself from cases in which she took part as a government lawyer.
Bloomberg initially requested similar information for aid recipients under three other Fed emergency programs. The central bank released details for those facilities and others in December, after Congress required disclosure through the Dodd- Frank law.
The legislation didn’t apply retroactively to the discount window lending program, which provides short-term funding to financial institutions. Discount window loans made after July 21, 2010, must be released following a two-year lag.
Clearing House Association
“Fortunately, Congress was well aware of the sensitivity of disclosing this information,” the Clearing House Association said in its statement. “As part of the Dodd-Frank Act, Congress adopted a specific rule to ensure that in the future this confidential information will not be disclosed prematurely to the detriment of our financial system.”
The New York-based Clearing House Association, which has processed payments among banks since 1853, includes Bank of America NA, Bank of New York Mellon, Citibank NA, Deutsche Bank Trust Co. Americas, HSBC Bank USA NA, JPMorgan Chase Bank NA, U.S. Bank NA and Wells Fargo Bank NA.
In trying to shield the documents from disclosure, the Clearing House invoked a FOIA exemption that covers “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
The cases are Clearing House Association v. Bloomberg, 10- 543, and Clearing House Association v. Fox News Network, 10-660.