19 Banks in trouble - Bloomberg FOIA to reveal 2.3 Trillion in emergency loans

On August 28, 2009 the U.S. District Court of the Southern District of New York granted the Federal Reserve’s Order to Show Cause and motion for a stay of the Court’s recent Order compelling the Federal Reserve to produce “confidential” commercial and financial information concerning the financial institutions that have borrowed from credit facilities established by the Federal Reserve. The Federal Reserve’s current position is that the immediate release of documents would moot any appeal, and cause irreversible damage to the institutions whose information is disclosed.


In support of the Federal Reserve’s emergent application, the Clearing House Association, which describes itself as “an association of leading commercial banks” also filed a Declaration. Although the specific names of Clearing House members borrowing emergency funds were not revealed, General Counsel for the Clearing House did provide their members’ names in his Declaration, which include: ABN Amro Bank N.V., Bank of America, National Association; the Bank of New York Mellon; Citibank, N.A.; Deutsche Bank Trust Company Americas; HSBC Bank USA, National Association; JPMorgan Chase Bank, National Association; UBS AG; U.S. Bank National Association’ and Wells Fargo Bank, National Association. (ZH readers can learn more about the Clearing House Association, at www.theclearinghouse.org/about/association/000223f.php ).


The Clearing House disagreed with the Court’s decision regarding the competitive impact of disclosing a borrower’s participation in the FRBNY’s emergency funding programs, calling any disclosure of information, “potentially disastrous” and could result in “the immediate demise of an institution”. General Counsel for Clearing House specifically stated in his Declaration, “If the names of our member banks who borrow emergency funds are publically disclosed, the likelihood that a borrowing bank’s customers, counterparties and other market participants will draw a negative inference is great….Survival can depend on the ephemeral nature of public confidence.” (Of course, one could argue that this argument is greatly vitiated by virtue of simply naming Clearing House members in a court document).

Oral argument took place on August 27, 2009. The Federal Reserve, as predicted, represented to the Court that an additional search of what the Federal Reserve considered “official files” at the FRBNY revealed no documents responsive to Bloomberg’s FOIA requests. Bloomberg has reserved its right to dispute this issue pending the outcome of the appeal. The Federal Reserve and Bloomberg consented to seek an expedited appeals process, upon the Federal Reserve obtaining authorization to proceed with an appeal by the District Court’s September 30, 2009 deadline.