Judge Rules Fed Must Disclose Firms That Accept Aid
Wednesday, August 26, 2009
A federal judge ruled Monday that the Federal Reserve must disclose the names of financial companies that have taken hundreds of billions of dollars in emergency aid during the financial crisis, a major setback to the central bank's long-standing policy of making such loans on a confidential basis.
Loretta Preska, chief judge for the U.S. District Court in Manhattan, wrote that the Fed had no legitimate reason to deny a request for the information made by Bloomberg News, rejecting the argument that such publicity would deter firms from seeking necessary aid in the future.
Preska gave the Fed five days to turn over the information, which also has been requested by other news media organizations, including The Washington Post.
A Fed spokesman said the agency was reviewing the decision, which the central bank could seek to appeal.
The ruling comes amid broad pressure for the Fed to provide more information about its activities, provoked in large part by the agency's leading role in responding to the financial crisis. The Fed has provided more than $1 trillion in aid through roughly a dozen emergency programs.
The Fed has responded by releasing detailed information about some programs and broader information about its other activities. Fed Chairman Ben S. Bernanke even answered audience questions at a July "town hall forum" in Kansas City. But the Fed and other central banks have long argued that naming aid recipients would be counterproductive, because the appearance of weakness might scare away investors and customers.
Bloomberg had filed a request under the Freedom of Information Act seeking the names of borrowers and details of aid packages. The company then sued the Fed after its request was rejected, arguing that the public had a right to know how the Fed was spending public money.