Fed Accused Of Shrouding $2 Trillion In Bank Loans In 'Secrecy'

By Mark Pittman
April 16 (Bloomberg) -- U.S. taxpayers need to know the risks behind the Federal Reserve’s $2 trillion in lending to financial institutions because the public is now an “involuntary investor” in the nation’s banks, according to a court filing by Bloomberg LP.
The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. Bloomberg, the New York-based company majority- owned by Mayor Michael Bloomberg, sued Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit. It made the new filing yesterday.
“The Board’s arguments are based on wispy speculation, lack evidentiary support and are contradicted by economic theory,” said Thomas Golden and Jared Cohen, lawyers with New York-based Willkie Farr & Gallagher LLP, in a motion asking the judge to require disclosure.
“These government actions, which have been shrouded in secrecy, are at the heart of Bloomberg’s FOIA requests,” the attorneys said.
Members of Congress also have demanded more information than PresidentBarack Obama and former President George W. Bush have disclosed on the bailout of the U.S. financial industry. Congress approved $700 billion to bolster banks, whose losses on mortgage securities and home loans contributed to the recession.
‘Within Their Discretion’ “We’ve all got a stake in how the government is managing this program,” saidLucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. “The information is definitely something that is within their discretion to disclose.” LinkHere