It seems the Feds did a total of $2 trillion in emergency loans and isn’t very keen on disclosing details. Under FOI legislation, there are provisions for withholding information, but nobody’s too impressed in this case.
Nor is Bloomberg, which while it acknowledges the right of the Feds to withhold, is trying to do its own job, and that’s not being helped much by a large silent gap in useful, relevant market information.
The principles of Freedom of Information are very simple. Information is made available unless there’s a valid, statutorily-permitted, reason.
Bloomberg wanted the names of recipients of loans, and the details of assets used as collateral on those loans. This would be a borderline case in terms of basic FOI, but there is a very strong public interest factor. Bloomberg is operating well within its parameters as a financial news source, and this information is important.
The Fed may have a few reasons of its own, beyond the bureaucratic, and that’s where the sparks are occurring. It’s reasonable to assume some of this information is market sensitive.
Commentary isn’t exactly vague, either.
Bloomberg:
The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.
“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.
The market, in short, thinks it has a right to know. However- some information can be legitimately called confidential. Commercial information, given to competitors, can make a real mess. The Fed could be considered liable for any damage resulting from releasing the information, if it’s found to be outside its legal rights.
Impasse? We’re about to find out. Bloomberg has filed a suit over the refusal. People in the industry are agreeing with Bloomberg about the "Right To Know" issues.
The Fed, meanwhile, sent Bloomberg a 5 page letter detailing its reasons for not releasing the information.
Given that Bloomberg isn’t likely to be overawed by the situation, it looks like the Fed is trying, ineffectually, to make a point, and Bloomberg isn’t buying it. There’s a reason for that, too. Some of the borrowers included Lehmann Bros, Citigroup, and JP Morgan Chase. There
are market implications, whether anyone likes it or not.
The banks definitely don’t like it. They’re worried about a negative sales effect, which could aggravate the existing situation and maybe cause a run on the banks.
Shades of 1929 in that one, and if nobody’s too happy about this situation, it’s because there’s an unholy smell of frying fat coming from places it’s not supposed to be coming from.
Bloomberg do have a very important point. They say the collateral lists are fundamental to understanding the situation, and how it’s being managed.
That, of course, is nothing less than obvious.
Whether anyone wants any further shocks is almost debatable.
