Fed Is Pushed Closer to Having To Reveal Bailout Banks and Toxic Collateral

For the second time in a row, and this time one step below the U.S. Supreme Court, "Bailout Ben" Bernanke's Federal Reserve has been ordered to release to the public the details of its biggest bank bailout, the $2 trillion Term Asset Lending Facility (TALF). These details—what banks and non-banks got the bailout loans, how much they got, and what "collateral" in collapsed securities the Fed took for the loans—had been demanded already in 2008 by then-New York Governor Elliot Spitzer, who was put under FBI surveillance and then scandalized out of office soon thereafter. The same was demanded in a Freedom of Information Act (FOIA) suit by Bloomberg News and Fox News, and it is that suit in which the Fed has lost again.

A panel of the Federal 2nd Circuit Court of Appeals (New York) Friday morning upheld a New York judge's earlier ruling against the Fed, and ordered it to release the gory $2 trillion bailout details. The Fed Board must disclose documents identifying financial firms that might have collapsed without government bailout. In the case of one that did fail, Lehman Brothers, the bankruptcy court has just issued a report showing that Lehman and Timothy Geithner's New York Fed apparently colluded to use worthless collateral for Fed lending, and to commit and condone accounting fraud concerning Lehman's "liquidity position" before it blew out. Congressional hearings like those exposing similar collusion with AIG by the New York Fed, have been demanded.

The Fed had argued absurdly that it could withhold the information under an exemption that allows Federal agencies to refuse disclosure of "trade secrets" and privileged commercial or financial information. The FOIA sets forth no basis for the exemption the Board asked for, U.S. Circuit Chief Judge Dennis Jacobs wrote in the 2nd Circuit opinion. The Fed would have to ask Congress to amend the FOIA—but the House of Representatives has already passed Rep. Ron Paul's (R-Tex.) bill compelling just such an audit of the Fed, as the Bloomberg/Fox suit is seeking by other means. Or, the Fed will have to get the Supreme Court to reverse the Second Circuit. Otherwise, more filthy details of the bailout crimes will soon come out.