For generations, America’s central bank, the Federal Reserve, has stood powerful and secretive in its marble palace on Washington’s Constitution Avenue. Now its back is to the wall as well.
The flourishing Tea Party movement, in its search for villains supposedly leading us into socialist tyranny, has begun denouncing the Fed along with such other unlikely suspects as President Barack Obama, the United Nations, the Council on Foreign Relations and the Tripartite Commission.
More seriously, Bloomberg News is suing the Fed for details on the trillions of dollars it has been feeding into the big banking firms. Bloomberg, joined by The Associated Press, The New York Times, The Wall Street Journal and other news organizations, has won in a U.S. District Court. The case is now before a U.S. Court of Appeals.
Bloomberg, one of the few media giants that is expanding and making money, got interested in the Fed’s secrets in 2008 after Bear Stearns and Lehman Bros. had collapsed and the Federal Reserve Bank of New York had widened its discount window and begun making loans totaling $2 trillion to other troubled financial institutions. Their losses on mortgage securities and other loans had contributed to the recession. Bloomberg asked for details on the collateral posted for the loans, widely suspected of being overvalued. The Fed stalled, and Bloomberg sued.
Chief Judge Loretta A. Preska of the U.S. District Court of New York ruled in Bloomberg’s favor last August. In a 47-page opinion, she said the Fed had failed to show that disclosure of the recipients and terms of the loans would cause borrowers to suffer “imminent competitive harm” by being stigmatized for using federal lending programs.
She directed the Fed to produce the documents within five days but stayed the order pending the Fed’s appeal to the U.S. Court of Appeals. A three-judge panel may not rule for months. Whatever its decision, the case probably will go to the U.S. Supreme Court.
In oral arguments in January, Bloomberg said the public has a right to know basic information about the “unprecedented and highly controversial use” of public money, according to BusinessWeek magazine, now owned by Bloomberg.
BusinessWeek’s account took a dig at President Obama, noting he had complained about little accountability or transparency in the Bush administration’s $700 billion Troubled Asset Relief Program, or TARP.
When the New York-based Clearing House, representing the biggest banks, complained that no other nation’s central banks had to make their actions public, the chief appellate judge responded: “Very few countries around the world have a Freedom of Information Act.”
As taxpayers, we all have a stake in this case. It was our money that kept those financial giants afloat. And it is our money that enabled Goldman Sachs and other companies that helped cause the meltdown to ladle out huge bonuses. We should know the facts to learn what went wrong and to prevent the next meltdown.