NEW YORK (Reuters) - The Federal Reserve will have to appeal to the Supreme Court if it wants to avoid having to disclose details of its emergency lending programs to banks bailed out with taxpayer money during the financial crisis.
The U.S. 2d Circuit Court of Appeals denied the Fed’s motion on Friday to rehear the case in which Bloomberg LP, the parent of Bloomberg News and News Corp’s Fox News Network sought information on the U.S. central bank’s emergency lending programs that began in late 2007.
The programs, designed to shore up the financial markets, more than doubled the Fed’s balance sheet to well over $2 trillion, especially in the wake of the September 2008 collapse of Lehman Brothers Holdings Inc.
The Fed maintained that disclosing the information sought by the news outlets under the Freedom of Information Act (FOIA) could stigmatize banks, causing a loss of confidence that could lead to deposit runs and the demise of some lenders.
The Clearing House Association, a group of major U.S. and European banks, supported the Fed’s efforts.
“We are reviewing the decision and considering our options for appeal,” Fed spokesman David Skidmore said.
Joe Dillon, a Clearing House spokesman, declined to comment.
“DISCLOSURE, NOT SECRECY”
In his March ruling against the Fed, the chief judge of the appeals court, Dennis Jacobs, wrote for a three-judge panel that to award the central bank the power to deny disclosure would undermine the idea that “disclosure, not secrecy, is the dominant objective” of FOIA.
The Fed argued in its May 3 request for a re-hearing by the entire appeals court that the panel erred in not excusing it from having to disclose borrowers’ names, loan amounts and loan dates for transactions at its discount window and from its emergency lending facilities.
“The real-world consequence of the panel’s decision will be serious, perhaps irreparable harm to the institutional borrowers,” the Fed said in its brief.
Clearing House members include the ABN Amro Bank NV unit of Royal Bank of Scotland Group Plc, Bank of America Corp, Bank of New York Mellon Corp, Citigroup Inc, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co, UBS AG, US Bancorp and Wells Fargo & Co.
The cases are Bloomberg LP v. Board of Governors of the Federal Reserve System et al, U.S. Court of Appeals for the Second Circuit, Nos. 09-4083, 09-4097.
Reporting by Grant McCool and Jonathan Stempel; Additional reporting by Emily Kaiser