The litigation was started last year when financial press outlet Bloomberg sued the FED Board of Governors.
(For background, this Google has links.)
I will quote below primarily the Senate site of Independent Bernie Sanders of Vermont, and then Reuters reporting, to flesh things out.
First, Aug. 25, this link, posting Bloomberg's reporting - given fully below without excerpting:
Court Orders Federal Reserve to Disclose Emergency Loan Details (Bloomberg)
By Mark Pittman
August 25, 2009
Aug. 25 (Bloomberg) -- The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 on behalf of its Bloomberg News unit.
“The Federal Reserve has to be accountable for the decisions that it makes,” said Representative Alan Grayson, a Florida Democrat on the House Financial Services Committee, after Preska’s ruling. “It’s one thing to say that the Federal Reserve is an independent institution. It’s another thing to say that it can keep us all in the dark.”
The judge said the central bank “improperly withheld agency records” by “conducting an inadequate search” after Bloomberg News reporters filed a request under the information act. She gave the Fed five days to turn over documents it told the reporters it located, including 231 pages of reports, and said it must look for more at the Federal Reserve Bank of New York, which runs most of the loan programs.
‘Involuntary Investor’
The central bank “essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,” Preska wrote. “Conjecture, without evidence of imminent harm, simply fails to meet the Board’s burden” of proof.
David Skidmore, a Fed spokesman who said the board’s staff was reviewing the 47-page ruling, declined to comment on whether the central bank would appeal.
Bloomberg said in the suit that U.S. taxpayers need to know the terms of Fed lending because the public became an “involuntary investor” in the nation’s banks as the financial crisis deepened and the government began shoring up companies with capital injections and loans. Citigroup Inc. and American International Group Inc. are among those who have said they accepted Fed loans.
‘Public Interest’
“When an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens don’t have the right to know,” said Matthew Winkler, the editor-in-chief of Bloomberg News. “We’re gratified the court is defending the public’s right to know what is being done in the public interest.”
The Fed’s balance sheet about doubled after lending standards were relaxed in the wake of the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008. For the week ended Aug. 19, Fed assets rose 2.3 percent to $2.06 trillion as it continued to buy mortgage-backed securities under a program allowing the central bank to purchase non-government securities for the first time.
The U.S. House may vote as soon as next month on a bill to require the Fed to submit to audits by the Government Accountability Office, said Representative Scott Garrett, a New Jersey Republican on the Financial Services Committee.
‘Wake-Up Call’
The judge’s ruling “is strikingly good news,” Garrett said. “This is what the American people have been asking for.”
The Freedom of Information Act obliges federal agencies to make government documents available to the press and public. The Bloomberg suit, filed in New York, didn’t seek money damages.
“The public deserves to know what’s being done with the money,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. “This ought to be a wake-up call for the public that they need to be far more educated about this.”
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).
Next, again from the Sanders Senate site, an update from yesterday, Aug. 31, reporting how the FED wants the order stayed until it can appeal, with the FED arguing enforcement of the order would render an appeal meaningless and would irreparably harm the financial reputations of boondoggle recipients, somehow, and with Sanders disputing such thinking, this link (again a full and complete quote):
Fed Secrecy
August 31, 2009
The Federal Reserve has until Sept. 30 to appeal a federal judge’s order requiring the central bank to disclose the names of financial institutions that took more than $2 trillion in secret emergency loans. The Fed’s Board of Governors asked Manhattan Chief U.S. District Judge Loretta Preska to delay enforcement of her ruling that the identities of hundreds of borrowers must be made public. The central bank wanted the judge to stay her order until the U.S. Court of Appeals can review her ruling in the Freedom of Information Act lawsuit brought by Bloomberg News. “What has the Fed got to hide?” asked Senator Bernie Sanders. “Fifty-nine senators, 283 members of the House and a Chief U.S. District Judge have voiced their support for greater transparency at the Fed. Yet, the Fed still insists on equating 'independence' with secrecy. The time has come for the Fed to stop stonewalling and hand this information over to the public. Trillions of taxpayer dollars have been put at risk by the Fed propping up the banking sector and large corporations without the approval of Congress or the administration. The very least the Fed can do is tell the American people who received this money, how much they received, and what they are doing with it. This money does not belong to the Fed. It belongs to the American people.”
The Senate voted 59 to 39 last April 29 for an amendment by Sanders calling on the Fed to disclose the names of all of the institutions that received more than $2.2 trillion in taxpayer assistance, how much each received and what they are doing with the money. The amendment was included in the final version of the Budget Resolution.
Sanders also is the chief sponsor of legislation to require the Fed to name the financial institutions that have received what could total more than $7 trillion in loans and loan guarantees. A separate Sanders bill would require the Government Accountability Office to conduct an independent audit of the Fed.
Sanders also voiced his concern in a July 15 letter to Fed Chairman Ben Bernanke and Treasury Secretary Timothy F. Geithner. “As long as the Federal Reserve is allowed to keep the information on their loans secret, we will never know the true financial condition of the banking system,” the senator wrote.
At a Senate Budget Committee hearing on March 3, Sanders asked Bernanke to name the hundreds of banks that took money since the financial crisis began. Bernanke refused to name any of the financial institutions. He also would not say what the banks are doing with the money. Sanders noted that the separate $700 billion financial bailout passed by Congress last October requires the Treasury Department to identify recipients of bailout funds.
To watch Sanders floor statement on the amendment, click here.
[italics added]. The italicized text refers to the Ron Paul championed bill to have the FED audited. The most interesting thing I have seen of that effort, beyond the ever increasing number of cosponsors, something Sanders' text notes, is this:
SSUNDAY, AUGUST 30, 2009
Barney Frank Calls for Audit of Fed, Limits on Emergency Powers
Barney Frank is joining the “rein in the Fed” party, with a key distinction: he wants to steer clear of messing with the central bank’s independence in monetary affairs. Thus, the call for a Fed audit ex that activity is not surprising.
However, a possible new front is that Frank also wants to place some curbs on the Fed’s authority to lend to anyone it wants to in “unusual and exigent circumstances.” This is another blow against the idea of Fed as systemic risk regulator, a role it lists on its website as part of its mission, but was never authorized by Congress.
The Fed (and no doubt many bankers) will howl that these powers are necessary for the Fed to safeguard banks, now that markets and exposures are so enmeshed. And Frank may not be serious about winning on this issue, but may regard it as tactically useful to take a particularly aggressive stance here to make sure the Fed does not become the One Regulator to Rule Them All.
From Reuters:Rep. Barney Frank, the chairman of the U.S. House of Representatives Financial Services Committee, said he plans legislation to restrict the Federal Reserve’s emergency lending powers and subject the central bank to a “complete audit.”
At a recent town hall meeting, Frank said the House would pass a bill to use an audit to crack open the central bank’s books more widely, but in a way that will not encroach on the central bank’s monetary policy independence.
In addition, he said the House would move to rein in the authority that allows the Fed to lend to a wide range of non-bank firms in “unusual and exigent circumstances.”….
Frank said the audit and emergency lending provisions would be incorporated in broader legislation to revamp U.S. financial regulation that would likely pass the House in October. By seeking a compromise with [Ron] Paul, Frank could strengthen the broader legislation’s chance at passage…
Frank said the House legislation would pave the way for an audit to look into what the central bank “buys and sells,” but he said the data would be released after a period of several months to avoid impacting financial markets.
Reading the blog's interpretation to be that Barney Frank is trying to hijack the train, and to reroute it, is where the fun seemingly begins. To paraphrase Bill Clinton, "it depends on how you define 'audit'" in that watering the word down enough will lead to a governmental equivalent of the auditing done of Enron before the thing went splat. Yet Frank concedes something, and besides the notion of delayed reporting and pre-defining limits on FED discretionary spending, there is an appearance that Frank, independent of public disclosure time lags, simply would concede far more to future FED discretion than Ron Paul and Bernie Sanders believe proper:
The Reuters item said more:
A bill sponsored by Texas Republican Rep. Ron Paul that would allow the Government Accountability Office, a federal watchdog agency, to audit Fed interest-rate decisions has won the co-sponsorship of more than half of the House.
Fed Chairman Ben Bernanke has warned that the bill would compromise the U.S. central bank's policy-making independence and could undermine financial markets and the economy.
Frank said he has been working with Paul on compromise language. "He agrees that we don't want to have the audit appear as if it is influencing monetary policy because that would be inflationary," Frank told constituents. A video of his remarks was posted on the popular video file-sharing website YouTube here.
Steven Adamske, a spokesman for Frank, told Reuters compromise language had not yet been written. He provided no further details. A spokesman for Paul could not be reached.
OCTOBER TARGET
Frank said the audit and emergency lending provisions would be incorporated in broader legislation to revamp U.S. financial regulation that would likely pass the House in October. By seeking a compromise with Paul, Frank could strengthen the broader legislation's chance at passage.
As chairman of the House Financial Services Committee, Frank is a key player in the effort to overhaul U.S. financial regulation.
The Obama administration has proposed giving the Fed responsibility for overseeing firms whose collapse could endanger the entire financial system. At the same time, it wants to strip the central bank of its consumer protection function, and invest that authority in a new agency.
Frank expressed unease at what he called the Fed's power to "lend money to anybody they want" in emergency circumstances. "We are going to curtail that lending power. We are going to put some restraints on it," he said.
Since the financial crisis struck two years, the Fed has used this emergency authority to prop up a number of non-bank financial firms with billions of dollars in loans, including insurer American International Group.
The Fed's actions have angered many lawmakers who are concerned the central bank has put taxpayer money at risk. Fed officials have defended their actions as necessary to prevent a deeper credit crisis and widespread damage to the economy.
Bernanke, who President Barack Obama nominated this week to serve a second four-year term at the helm of the central bank, told lawmakers in July that the Fed understands the need to be accountable to taxpayers but that monetary policy decisions needed to be shielded from political interference.
It seems as if shielding "monetary policy decisions" is a loophole you could drive a truck through, but there has always been exuberant market reaction to FED actions so that it can be argued that too much contemporaneous disclosure could enhance volatility that already exists at a high level, whenever the FED acts.
However, I expect some readers would agree, it would be enlightening to see the "policy" audited behind FED decision making to bail out AIG and Bear Stearns to the extent they did, but to let Lehman Brothers go under; together with some sunshine on FED "policy" thoughts (if any) about reining in executive compensation and perks during bailout activity, particularly the egregious things that have been reported concerning AIG failure being rewarded in apparently unjustifiable ways. It seems that the AIG bailout was to reward Wall Street's lack of good sense in seeking to assure counterparty solvency to meet the assurances given to other firms, via AIG taking positions in credit default swaps, where it assumed contingent risk [as with insurance] but while holding no pool of reserves to cover likely needed payouts [as regulators require with insurers].
In effect, sectors of Wall Street took a "Trust me" from AIG, and did not have to suffer consequences of such decision making. Sure, the house of cards might have collapsed, but it is distressing that citizens must suffer whenever the financial sector's engine heads full speed down a wrong track.
_____UPDATE_____
More from Bloomberg, here. This excerpt:
The Fed’s lawyer went on to say that she did not know what records would fall under a “delegated function,” which would be a task assigned to the New York Fed.
Preska interrupted Wheatley, saying that “Ms. Wheatley, I held that’s not the standard. You didn’t search under the regulation. You’re supposed to search under the regulation.”
Preska scheduled another conference call for 2:30 p.m. today to discuss the schedule for a search of the New York Fed.
“Nobody is going to deny you your right to an appeal,” Preska said on the call, “We’re going to do it expeditiously, not in a piecemeal fashion and hand it all off to the Second Circuit.”
Also, this link for docket info and items on the litigation; this Wikipedia entry on Judge Preska.
______FURTHER UPDATE______
This blog entry has a link over to a "TrimTabs" analysis, with this excerpt suggesting there are high levels of insider selling vs. buying, and extensive short selling positions [people "borrowing" shares to sell at current prices, the "borrwoing" to be covered by subsequent purchase, the gamble being the price later will be lower]:
Insider Selling in August Soars to 30.6 Times Insider Buying, Highest Level Since TrimTabs Began Tracking in 2004.
[...] "The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon," said Charles Biderman, CEO of TrimTabs.
TrimTabs' data on insider transactions is based on daily filings of Form 4, which corporate officers, directors, and major holders are required to file with the Securities and Exchange Commission.
In a research note, TrimTabs explained that insider activity is not the only sign the rally is about to end. The TrimTabs Demand Index, which tracks 18 fund flow and sentiment indicators, has turned very bearish for the first time since March.
[...] "When corporate insiders are bailing, the shorts are covering and investors are borrowing to buy, it generally pays to be a seller rather than a buyer of stock," said Biderman.
I believe the TrimTabs service is by subscription, i.e., not allowing a direct link. The blog itself clearly has a dim view of Obama, and argues the disputable position that he owns the "mess" independent of having inherited it as a "Bush-Cheney mess." Whether you buy into that suggestion or not, the insider trading suggests we might not be out of the financial morass yet, and even permits one to guess the worse is yet to come, i.e., there may be another "bad news" shoe to drop.
_______FURTHER UPDATE_______
The post above this one mentions Robert Reich's blog, and on this topic he has this Aug. 25 post, arguing "the Senate should confirm Bernanke, but link the confirmation vote to new legislation that makes the Fed more transparent." With Reich and Frank and Paul and Sanders in the same mode, both wings of opinion are represented in favor of greater transparency [and a greater public responsibility that greater transparency might yield]. An interesting side feature of the Bloomberg v. Board of Governors litigation, however, is to what extent is the FED subject to FOIA, as an arm of the government and not an independent privately owned central bank run by bankers and a Board which, except for the Chairman, are appointed solely by private banks - a question that might go to the Supreme Court in any instance where Congress, under the commerce clause, has not mandated anything either way. As a creature of statute [The Creature from Jekyll Island, one book says] the FED only exists via act of Congress; but has it explicitly been placed under FOIA?
I could see Scalia [and Thomas on his sleeve] playing word games, and Roberts, who knows, there'd only be a need for two others ---