Bloomberg sues Federal Reserve to force disclosure of collateral for bailout loans

November 8, 2008 by · Leave a Comment
Filed under: Legal News 

Kudos to Matt Winkler and the Bloomberg team.  Finally it looks like people are starting to come to their sense and with that we have real questions being asked from a top-notch media outlet.   Bottom line is that most of these banks in questions gave extremely distressed if not worthless assets in exchange for our treasuries.  

I believe their plan was to give them these loans and then hopefully we would start borrowing at the same pace and that would let them dig themselves out of this crater of a hole.  Now that we are starting to realize this downturn is going to be severe and we have long-term consequences to deal with, we know that this bailout was really just a lifeline to a bunch of banks that should of failed at this point.   I also heard that the Supreme Court might look at this bailouts and see if they are constitutional. 

News:

 Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.

The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.

“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.

The Fed has lent $1.5 trillion to banks, including Citigroup Inc. and Goldman Sachs Group Inc., through programs such as its discount window, the Primary Dealer Credit Facility and the Term Securities Lending Facility. Collateral is an asset pledged to a lender in the event that a loan payment isn’t made.

The Fed made the loans under 11 programs in response to the biggest financial crisis since the Great Depression. The total doesn’t include an additional $700 billion approved by Congress in a bailout package.

Fed’s Position

Bloomberg News on May 21 asked the Fed to provide data on the collateral posted between April 4 and May 20. The central bank said on June 19 that it needed until July 3 to search out the documents and determine whether it would make them public. Bloomberg never received a formal response that would enable it to file an appeal. On Oct. 25, Bloomberg filed another request and has yet to receive a reply.

The Fed staff planned to recommend that Bloomberg’s request be denied under an exemption protecting “confidential commercial information,” according to Alison Thro, the Fed’s FOIA Service Center senior counsel. The Fed in Washington has about 30 pages pertaining to the request, Thro said today before the filing of the suit. The bulk of the documents Bloomberg sought are at the Federal Reserve Bank of New York, which she said isn’t subject to the freedom of information law.     

Source: Bloomberg

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