Fed Makes Taxpayers ‘Involuntary Investors’ in Banks, Suit Says

Fed Makes Taxpayers ‘Involuntary Investors’ in Banks, Suit Says - 4/15/2009

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Fed Makes Taxpayers ‘Involuntary Investors’ in Banks, Suit Says
Mark Pittman

Bloomberg. April 15, 2009
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EXCERPT: The Federal Reserve should identify U.S. banks funded by its emergency lending because taxpayers are “involuntary investors” who need to know the risks, Bloomberg LP said today in a court filing. The Fed refuses to name the borrowers, the amounts of loans or assets banks put up as collateral under 11 programs, arguing that doing so might set off a run by depositors and unsettle shareholders. Bloomberg, the closely held New York-based company majority-owned by Mayor Michael Bloomberg, sued Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit. “The Board’s arguments are based on wispy speculation, lack evidentiary support and are contradicted by economic theory,” said Thomas Golden and Jared Cohen, lawyers with New York-based Willkie Farr & Gallagher LLP, in a motion asking the judge to require disclosure. “These government actions, which have been shrouded in secrecy, are at the heart of Bloomberg’s FOIA requests.” Members of Congress also have demanded more information than the Bush and Obama administrations have disclosed on the bailout of the U.S. financial industry. Congress approved $700 billion to bolster banks, whose losses on mortgage securities and home loans contributed to the recession. Fed Considers Disclosure “We’ve all got a stake in how the government is managing this program,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. “The information is definitely something that is within their discretion to disclose.” Fed officials are considering steps to provide the public with more information about emergency programs, people familiar with the matter said yesterday. The Federal Reserve, consisting of seven governors in Washington and 12 regional banks, was established in 1913 as the U.S. central bank, charged by Congress with ensuring low inflation, maximum employment and a stable financial system.

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