Narrowly construed, the suit, filed in November 2008, seeks the release under FOIA of documents called term reports. Those reports contain information about the hundreds of billions of dollars the Federal Reserve lent to banks at the height of the crisis — first through its discount window and then through an acronymic soup of emergency programs with arcane-sounding names like the Primary Dealer Credit Facility and the Term Securities Lending Facility.
While the Fed does customarily release data in the aggregate about its lending — the bank bailout is about $2 trillion, all told — it has always shielded information about specific loans to specific institutions. If released, the documents in this lawsuit would punch directly through that shield: Who got money from the Fed? How much did they get? In exchange for what collateral? And under what terms?
That, said Charles Geisst, a finance professor at Manhattan College, would represent an unparalleled move toward openness. “It would mean that the transparency we now demand from our corporations, for example, would spread up all the way to the Fed,” he said.
In its own briefs, the Fed has argued that such disclosures could “stigmatize” financial institutions by suggesting they were desperately in need of government money and, therefore, weak. In its doomsday scenario, the Fed has worried that these weak banks could be subject to 1930s-style bank runs and that, in the future, even strong banks that were considering taking money might instead retreat in trepidation, preventing the Fed from practicing the already delicate art of monetary policy.
The Fed’s worries grew last summer when the chief federal district judge in Manhattan ruled in favor of Bloomberg News, setting up a showdown last month in the United States Court of Appeals for the Second Circuit. This appellate battle — which includes a similar suit by Fox News that lost in the district court — has quickly become the New York front in a bitter, two-pronged war against the Fed. (In Washington, legislation is pending to force the central bank to undergo an audit.) Indeed, as the lawsuit moved to its next round, its context was expanded by way of interventions and supporting briefs.
