The US Federal Reserve must reveal documents identifying financial companies that received Fed loans to survive the financial crisis, a federal appeals court ruled on Friday.
A panel of the 2nd US Circuit Court of Appeals in Manhattan said in two separate opinions that such information isn’t automatically exempt from requests under the Freedom of Information Act (FOIA).
Cases were brought by News Corp’s Fox News Network LLC and Bloomberg LP. The two companies sought details about loans that commercial banks and Wall Street firms received and the collateral they put up. The appeals judges had received written arguments on behalf of other news agencies, including The Associated Press.
The Fed argued that if it identified banks that drew emergency loans, it could cause a run on those institutions, undermine the loan programs and potentially hurt the economy.
The Federal Reserve said it was studying Friday’s ruling.
“We are reviewing the decision and considering our options for reconsideration or appeal,” Fed spokeswoman Michelle Smith said.
The Fed could take the panel’s ruling to the full appeals court, whose decision could then be appealed to the US Supreme Court.
Until a final ruling, the Fed is not compelled to turn over any documents.
Senator Byron Dorgan, who has pressed the Fed to release details about the loan programs, urged Federal Reserve Chairman Ben Bernanke on Friday to “immediately” identify the firms that drew emergency loans and their amounts.
Failing to do so after the court rulings “would be a pretty arrogant thing for the Fed to do,” Dorgan said in an interview.
In the Fox case, a three-judge panel concluded that the documents should be available to review by news organizations and the public.
In the Bloomberg case, the appeals court rejected the Fed’s argument that identifying the banks and providing other information would harm them and discourage other distressed banks from seeking the Fed’s help. The court said the disclosure requirements under FOIA are up to Congress, not the court, to change.
The Fed has been fighting the matter in court and on Capitol Hill. Lawmakers, picking up on public anger over the Fed’s role in bailing out Wall Street, have demanded the Fed be more open about its operations.
Offering an olive branch, Bernanke late last month said the Fed would support legislation to identify companies that used the Fed’s special lending facilities — “after an appropriate delay.”
A delay in identifying the companies would help discourage investors from viewing a company as having financial troubles, he said.
But Bernanke said the confidentiality of banks drawing emergency loans from the Fed’s “discount window” must be preserved. The Fed acts as lender of last resort for banks that can’t get money from private sources.