Single Page | 
Multiple Pages
Home > BizTimes Daily > Archives > November 10, 2008
Bloomberg files lawsuit to disclose terms of federal bank loans
Published November 10, 2008 - BizTimes Daily
1 of 10 | Next 
Bloomberg News has filed a federal lawsuit under the U.S. Freedom of Information Act to force disclosure of the details of almost $2 trillion in emergency loans from American taxpayer money to the nation's banks.
The Federal Reserve Bank is refusing to identify the recipients of loans.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson had said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system.
Two months later, as the Fed lends far more than that in separate rescue programs that did not require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return, according to Bloomberg.
The Bloomberg lawsuit argues that the collateral lists `"are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression.''
The Fed has lent at least $81 billion to American International Group Inc. (AIG), the world's largest insurer, so that it can pay obligations to banks. AIG today said it received an expanded government rescue package valued at more than $150 billion.
"As a taxpayer, it is absolutely important that we know how they're lending money and who they're lending it to,'' Lucy Dalglish, executive director of the Arlington, Va.- based Reporters Committee for Freedom of the Press, told Bloomberg.
"The collateral is not being adequately disclosed, and that's a big problem,'' Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., told Bloomberg. "In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''
The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the worst financial crisis since the Great Depression.
"It's your money; it's not the Fed's money,'' billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York, told Bloomberg. "Of course there should be transparency.''
Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.
The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the Troubled Asset Relief Program (TARP), which was signed into law Oct. 3.
