Federal Reserve Locks Vault on Bailout Records

By Fleschert, Miranda | News Media and the Law, Fall 2009 | Go to article overview
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Federal Reserve Locks Vault on Bailout Records


Fleschert, Miranda, News Media and the Law


Three public records suits challenge denials of records requests

A federal appeals court will decide how transparent last year's unprecedented taxpayer-funded bailout will be when it considers whether two media companies are entitled to obtain financial records that identify which companies received emergency funds from the government.

Bloomberg L.P. and Fox News Network brought nearly identical cases against the Federal Reserve Board that resulted in vastly different decisions from two judges sitting in the U.S. District Court in Manhattan. One ordered release of the records while the other shielded them from public view.

"Transparency - especially with the bailouts - is essential to good governance," said Craig Jennings, a senior analyst at the nonprofit government transparency group OMB Watch. "Without understanding how the funds are being used it becomes impossible to judge the value of the bailout policy."

Three news organizations filed Freedom of Information Act lawsuits in 2008 after the board - and in one suit the U.S. Department of the Treasury - denied or ignored their requests.

Bloomberg and Fox both asked for records relating to the board's $2 trillion emergency lending program, including the name of companies that received funds, the terms and rates of the loans offered and the collateral that was posted. The New York Times sued the board and the treasury after both ignored requests for the appointment books, calendars, phone logs and correspondence of Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson. That suit has not yet been decided by the district court.

Fox lost its suit in July and appealed to the U.S. Court of Appeals in New York City (2nd Cir.) on Sept. 9. Bloomberg won its FOIA suit in late August and the board appealed on Sept. 30. It is unclear whether the two cases will be consolidated.

What is an Agency?

Both cases hinge on whether records held at regional Federal Reserve Banks are subject to FOIA requests directed at the board. Congress oversees the entire Federal Reserve System, which is made up of the board - a federal agency located in Washington, D. C. - and 12 regional banks that operate as private corporations, receive private funding, possess distinct powers from those of the board and do not publish any FOIA regulations.

The subject of both the Bloomberg and Fox News suits was the Fed's Discount Window lending program, which is regulated by the board.

In the Bloomberg case, Judge Loretta Preska rejected the board's argument that the records sought were not board records because they were housed at the Federal Reserve Bank of New York. The board contended that because the bank is not an agency, its records are not subject to FOIA and maintained it was only obligated to search its own internal records and not those of the bank. Preska noted that if a record is kept in the board's official file at any of the Fed's regional banks - and the secretary of the board is the official custodian ofthat record - then it qualifies as an agency record of the board, regardless of the subject matter, and must be searched to comply with FOIA requests.

In a courtroom just down the hall, however, Judge Alvin K. Hellerstein found in the Fox case that the board was only obligated to search the records it physically possessed, not those of the regional banks.

"It may be, as Fox argues, that no [Federal Reserve Bank] has a FOIA office to which FOIA requests may be submitted, that the only FOIA office for the Federal Reserve System is in the Board, and if Fox cannot obtain documents from the Board, it will be deprived of obtaining any meaningful documents enabling a public accounting of the Board's Discount Window loan program," Hellerstein wrote in his decision. "Whether or not this is so, it does not alter the fact that Fox served its requests only upon the Board and that the definition of a Board record is limited by statute.

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Federal Reserve Locks Vault on Bailout Records
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