Bloomberg News editor-in-chief Matt Winkler wrote an Op-Ed in the Wall Street Journal yesterday explaining why he is after the Federal Reserve to come clean about it’s secret lending program during the height of the financial crisis.
Bloomberg has filed a lawsuit against the Federal Reserve to force the Fed to reveal the name of the banks it lent money to in this operation, something I first blogged about last November. Last month, Bloomberg won its case in District Court. The Fed is now considering whether to appeal.
At issue is transparency in our financial system. In the Op-Ed, Winkler puts it thus:
The law doesn’t allow the government to get away with secrecy based on a mere claim that some sort of damage would result if it released the information in question. To prevail, the Fed must “provide evidence that if the requested information is disclosed, competitive harm would be ‘imminent,’” Judge Preska wrote. The Fed must show that competitors would use against a bank the fact that it received federal dollars—that running to the government trough for sustenance would become a competitive disadvantage.
That isn’t an easy test, and with hundreds of billions poured into financial institutions, it shouldn’t be. What’s more, the Fed didn’t come close to meeting this test. All it offered in court were sworn statements from Fed employees speculating that borrowers might be labeled as losers. They said nothing about how competing banks might use the information.
The issue at stake here is understanding the financial crisis and its aftermath. The information Bloomberg is seeking is vital to that, and it belongs to all Americans. Bloomberg isn’t alone in saying so. Dow Jones, the New York Times, the Associated Press, Gannett Newspapers, Hearst, Advance Publications, and the Reporters Committee for Freedom of the Press have all expressed support for Bloomberg’s efforts and may join a friend-of-the-court brief if the decision is appealed.
Below is a Bloomberg News video in which Winkler discusses the case with Betty Liu. In his opening remarks, Winkler says the Fed was taking on an unprecedented role and that this requires transparency.
I agree because the Fed has been politicized through these actions. Its independence is now threatened because of it as the Federal Reserve Transparency Act of 2009 attests.
Click for VIDEO
Originally published at Credit Writedowns and reproduced here with the author’s permission.