Public wins information, banks win delay

A week after the Federal Reserve released information from 2007-10 naming the banks which used its “main emergency aid program” (the “discount window“) at the conclusion of two FOIA requests/litigation, the public continues to learn more about how the program worked:

  • March 31: The Associated Press reported that most of the emergency lending took place in September/October 2008, much of the lending was repaid the next day, and the high-water mark was around $110 billion. The AP explained that the Fed had admitted details of substantial lending in December 2010, but the agency had refused to identify which commercial banks had borrowed.
  • March 31: Fox Business used the newly-released data to flesh out its summary of borrowing at the discount window (and the other ten Fed-based “special lending facilities”), from Goldman Sachs Group Inc. and JPMorgan Chase & Co. to… Harley Davidson. (The Wall Street Journal also assembled a list of lending programs last winter; at the time, it reported the Fed was still holding $2.3 trillion in “assets.”)
  • March 31: Senator Bernie Sanders (I-VT) noted that JPMorgan Chase CEO Jamie Dimon was pulling double duty at one point during the crisis, borrowing $313 billion in April 2008 at the same time he was serving on the board of directors of the New York Fed. (Sanders also mentioned his amendment directing the Government Accountability Office to audit the Fed, a process slated to be made public in July.)
  • March 31: The New York Times connected some borrowing to bank failures, flagging substantial loans to Wachovia and Washington Mutual before they were subsumed into Wells Fargo and JPMorgan Chase, respectively.
  • March 31: Bloomberg juxtaposed JPMorgan Chase CEO Jamie Dimon’s statements downplaying the bank’s borrowing with details of its loans totaling “at least $5.9 billion… over six months during the height of the financial crisis.” (Dimon had said, “I think it will make it harder for people to use the discount window in the future” and “We never intend to use the discount window.”)
  • April 1: Bloomberg highlighted billions of dollars in loans in 2008-10 to Arab Banking Corp., which was partially-owned (29%) by the Libyan state at the time, which would increase its stake to 59% by December 2010. (This seems parallel to recent American-Libyan interactions, such as President Obama’s executive order #13566 (non-gov link) and a modification of sorts (h/t Rolling Stone.)
  • April 2: The New York Times noted that much of the “discount window” borrowing involved foreign banks, and that U.S. financial officials were publicly quite chipper despite ominous increases in lending in mid-2007.
  • April 6: Bloomberg pointed out that when the Fed supported the largest foreign-bank beneficiary of the program, Dexia, it also supported American municipal financial authorities – though two Dexia subsidiaries have been named in a criminal antitrust case alleging bid-rigging by over a dozen financial firms, to the detriment of state and local governments.
  • However, Bloomberg also noted that generally, “the Fed won’t disclose the collateral it accepted, which would reveal the risks it took.” Though Bloomberg did catch the Fed making about $155 billion in loans in exchange for collateral nominally valued around $164 billion, much of dubious value, on September 29, 2008. (For a sense of the scale of the financial assistance, consider that a March 2009 Bloomberg article flagged the commitment (of $12.8 trillion at the time) as “approach[ing]” America’s 2008 GDP ($14.2 trillion), and a December 2010 CNN article described “a special loan program” as providing $9 trillion in “emergency overnight loans”)

The information – 894 PDF files, consisting of more than 29,000 pages – came to light after Bloomberg LP (parent of Bloomberg News) and News Corp. (parent of Fox News Network) had used FOIA to request records from the discount window and other emergency programs for April-May 2008 and August 2007-March 2010, respectively. The Fed rejected those requests, claiming the information deserved protection as confidential commercial/financial information under FOIA’s Exemption Four. However, federal courts repeatedly rejected the Fed’s arguments, and on March 21, 2011, the Supreme Court declined to grant certiorari to an appeal by a banking-industry consortium, the Clearing House Association LLC.

In this regard, the Supreme Court joined Congress, journalists, and transparency advocates in supporting an eventual sunset for confidentiality claims by banks. Banks had argued that the release of such information would “allow[] the public to observe [banks’] borrowing patterns during the recent financial crisis and draw inferences — whether justified or not — about their current financial conditions,” the Clearing House had claimed. And for almost a hundred years, the Fed had been able to keep such information secret. Even the 2010 Dodd-Frank financial regulation bill only mandated disclosure of discount-window loans made after its enactment on July 21, 2010. In fact, section 1103(b) (codified at 12 U.S.C. 248(s)) set the delay at eight full quarters later, giving borrowing banks two entire years of secrecy after the quarter in which borrowing occurred. (Bloomberg also noted that even Dodd-Frank only required disclosure of post-enactment discount-window information.)

Coincidentally, the FOIA request/litigation process ran its course in a little over two years, so one might say it was a wash. However, we would note that this litigation was quicker than usual, initiated by media entities that could afford to litigate, riding a wave of public curiosity about dramatic economic changes and secrets, and encountered only success at every judicial turn. Many FOIA requesters are not so lucky – and many similarly valuable elements of information are not as likely to reach the public.


SGI applauds Congress & White House for quick fix to overbroad FOIA exemption for the SEC

Today President Obama signed into law a bill that sped through the House and Senate to quickly fix an overbroad exemption from disclosure under the Freedom of Information Act.  The Sunshine in Government Initiative appreciates the quick action and hard work of transparency leaders in Congress to correct this mistake.

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Tracking FinReg’s SEC provision: Subtle word changes make a big difference

Between the legislative record for the SEC FOIA exemption in the Dodd-Frank financial reform law and the recent written statement of Mary Schapiro, chair of the Securities and Exchange Commission, we have been able to clarify the origin and evolution of the three confidentiality provisions that became law in Section 929I.  And despite Schapiro’s descriptions of the provisions in terms that downplay the importance or effect of changes in the language, we have observed the addition of two phrases, in two stages, to the FOIA exemptions in what would become Section 929I of the financial reform legislation.

The first change took place between the introduction of H.R. 3817 (Investor Protection Act of 2009) on October 15, 2009, which included provisions exempting various forms of information relating to “an examination of a person…” (Section 409), and the introduction of H.R. 4173 (Wall Street Reform and Consumer Protection Act) on December 2, 2009, which incorporated the language of H.R. 3817 as Section 7409. The latter bill applied the provisions to various forms of information relating to “an examination, surveillance, or risk assessment of a person…”

The second change took place between House referral of H.R. 4173 to the Senate after passage on December 11, 2009, and the release of the base text for the Conference Committee on June 10, 2010 (after which the language, now “Section 929I,” did not change). During that time, the three provisions of Section 7409 were condensed – and each added the phrase “or other regulatory and oversight activities” to the references to “surveillance” and “risk assessments.”

Schapiro testified that the “operative language” from her predecessor had referred to “an examination of a person…” in 2006/07/08. She added that “the operative language” from her July 2009 legislative proposal to the relevant committees had included a reference to various forms of information “including without limitation surveillance, risk assessments, or other regulatory and oversight activities.”

We admit these changes may be small – but we think those changes had a big impact on the reading of Section 929I and its application.

SGI testifies about new SEC FOIA exemption statute

SGI Coordinator Rick Blum provided testimony to the House Financial Services Committee regarding the Committee’s review of Section 929I of the Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Section 929I added three statutory exemptions – known as “b(3)”s, after the subsection of FOIA permitting them – for the Securities and Exchange Commission to use to withhold information from FOIA requesters. Blum argued that Section 929I is overbroad and should be re-written; only Congress can repair 929I; Congress should not risk waiting and having an overbroad interpretation of 929I become ensconced in agency practice; and this process can be part of a larger effort to improve congressional review of b(3) exemption statutes.

Joining Blum on the panel were former SEC Chairman Harvey Pitt, Angela Canterbury of the Project On Government Oversight (POGO), FOIA attorney Steven Mintz, and securities attorney Susan Merrill. Testifying in earlier panels were SEC Chairwoman Mary Schapiro, and Representatives Edolphus Towns and Darrell Issa (Chairman and Ranking Member, respectively, of the House Oversight and Government Reform Committee).

SEC & FOIA Exemption in Dodd-Frank: Your Take?

Update 8/9/10:  The hearing on the SEC FOIA exemption has been moved up to September 16th.

Original Post: We need some input.  You may have read that the financial reform law includes a provision that allows the SEC to withhold certain investigative files confidential.  Fox Business is attacking this as a broad exemption ripe for abuse, while SEC says it really is meant narrowly and will issue guidance.  And today the House Financial Services Committee announced a hearing on September 23rd September 16 to look into the matter.

What’s the impact on journalists who’ve covered the SEC? Let us know if you’ve covered the SEC and can shed some light.  Add them to comments or email us.  All comments will be treated as public unless you specifically say otherwise.

Update 8/9/10: The text in question is below the jump.

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