* Press seeks details of Fed bailout programs
* Fed says disclosure could hurt banks, financial system
* Bloomberg says disclosure breeds confidence
* News Corp's Fox News also opposes Fed
By Kristina Cooke and Jonathan Stempel
NEW YORK, Jan 11 A federal appeals court on
Monday appeared skeptical of U.S. Federal Reserve efforts to
prevent the press and the public from learning the names of
participants in emergency lending programs designed to support
and bail out the financial system.
The central bank has argued that disclosure would cause
"competitive and reputational harm" to participants, perhaps
triggering bank runs, and impede its ability "to effectively
manage the current, and any future, financial crisis."
Bloomberg News and News Corp's (NWSA.O) Fox News Network
LLC had sought details of the Fed's actions under the federal
Freedom of Information Act, or FOIA, which requires government
agencies to make documents available to the public.
A release of data could give the public, including bank
shareholders, a better sense of how the Fed was moving to prop
up the financial system during what is widely considered the
worst financial crisis since the Great Depression.
In a 1-3/4 hour oral argument, a panel of the U.S. Second
Circuit Court of Appeals in Manhattan questioned the Fed
argument that if potential participants knew they might be
named, they might choose not to borrow rather than face a
possible "stigma" for seeming to be in trouble.
This, the Fed had argued, could harm the broader financial
"I'm having a little trouble with it being a stigma outside
of, basically, a day," Circuit Judge Peter Hall told Matthew
Collette, a lawyer representing the Fed.
"You're talking of a crisis of a moment, or maybe a few
days, or a week," Chief Judge Dennis Jacobs added.
Collette said that if banks were dissuaded from borrowing
out of fear their names would be disclosed, it could harm their
businesses and force them into unwanted activities, perhaps
including fire sales of assets or firings of employees.
"The stigma is very real," Collette said. "This is a
problem in which there will be an assumption, potentially, that
this bank is in trouble."
Bloomberg brought its case to force the Fed to release
records of actions it took to shore up the financial system
starting in late 2007, including the March 2008 sale of Bear
Stearns Cos to JPMorgan Chase & Co.
Emergency lending programs have more than doubled the Fed's
balance sheet to am amount in excess of $2.2 trillion,
especially following the Sept. 15, 2008, collapse of Lehman
Brothers Holdings Inc LEHMQ.PK.
FOIA "breeds confidence in our public institutions, which
quite frankly is something that is sorely needed right now,"
said Thomas Golden, a lawyer for Bloomberg.
Bloomberg had won its case in Manhattan district court in
August. Chief District Judge Loretta Preska ruled that the Fed
failed to show that disclosing names could lead to a "downward
spiral of financial instability."
Fox News, in contrast, lost its case in the same court the
prior month. Judge Alvin Hellerstein said "the national economy
is not so out of danger, and the frailty of banks so different
now ... as to make the board's concern academic."
An appeals court panel typically takes several weeks or
months to rule. Its ruling may be appealed to the full court or
to the U.S. Supreme Court.
The Clearing House Association LLC, an industry-owned group
of banks, supported the Fed's position.
This group includes the ABN Amro Bank NV unit of Royal Bank
of Scotland Group Plc (RBS.L), Bank of America Corp (BAC.N),
Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N),
Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L),
JPMorgan Chase & Co (JPM.N), UBS AG UBSN.VX, US Bancorp
(USB.N) and Wells Fargo & Co (WFC.N).
"The press would like a blanket rule and change nearly 100
years of central banking policy in this country," said Robert
Giuffra, a lawyer for the Clearing House. "The problem is, you
can't set a blanket rule." He urged the court to step back and
leave it to Congress to set disclosure rules.
The Bloomberg case is Bloomberg LP v. Board of Governors of
the Federal Reserve System et al, U.S. Second Circuit Court of
Appeals, No. 09-4083. The Fox News case in the same court is
Fox News Network LLC v. Board of Governors of the Federal
Reserve System et al, No. 09-3795.
(Reporting by Kristina Cooke and Jonathan Stempel; Additional
reporting by Chris Sanders; Editing by Steve Orlofsky)