Bailout records released after writ denial

From the Spring 2011 issue of The News Media & The Law, page 15.

The U.S. Supreme Court decision in March to not hear an appeal of a case involving the federal Freedom of Information Act resulted in the release of thousands of pages of records documenting which banks received emergency taxpayer-funded loans during the economic bailout in 2008.

The court declined to hear the appeal in two cases brought by a coalition of banks that were attempting to keep records about the emergency federal discount window lending from the Federal Reserve from being released after Bloomberg LP and Fox News Network LLC requested the records in 2008.

The news organizations requested loan documents called “term sheets” from the Federal Reserve for banks that took part in the more than $3 trillion loan program. The term sheets include the banks’ names, the amounts borrowed and the collateral posted in return.

The primary argument the banks made against release was the threat of economic harm to the banks and the impact additional consumer panic could bring to the economy if it was revealed that major financial institutions were in danger of failing and needed government loans.

The U.S. Court of Appeals in New York City (2nd Cir.) held in both cases — Bloomberg L.P. v. Board of Governors of the Federal Reserve System and Fox News Network, LLC v. Board of Governors of the Federal Reserve System — that the records could not be withheld under Exemption 4 to FOIA, which exempts confidential, commercial or financial information that is obtained by the government from an outside person or organization. The court found that, because the records requested were records generated by the Federal Reserve itself about its lending program and not information received from an outside source, withholding the documents was improper.

Clearing House Association LLC, a coalition of banks that received the discount loans, appealed to the U.S. Supreme Court. The Federal Reserve declined to join the appeal after fighting the document release at the trial and appeals court levels.

Ten days after the Court’s decision, the records requested by Bloomberg and Fox News — totaling more than 29,000 pages — were released.

The documents revealed that foreign banks, including the Central Bank of Libya, received large portions of the loans given out during the bailout’s peak.

And the harm that was threatened to the banks if the records were produced? Bank stocks increased in the period following the information’s release, more than two years after the funds were received, undercutting the banks’ argument that the documents should never be released.

The release of the records — a victory for open government advocates — is short-lived. The Dodd-Frank Wall Street Financial Reform Bill, passed in July 2010, created a two-year grace period for releasing data on discount window loans given after July 21, 2010, a date beyond any of the records requested by Bloomberg or Fox. While the argument that the documents should never be released is negated, requesters must wait two years before getting information on future loans.