Bloomberg believes that the public can “handle the truth” regarding the Federal Reserve’s activities with banks.
By Wednesday, we’ll arrive at another key juncture in the dispute pitting Bloomberg (and other media outlets) against the Federal Reserve (and a host of banks) over release of information detailing recipients, beneficiaries and parties to roughly $2 trillion in disbursements of funds and taking on of loans by the Federal Reserve since last October.
Bloomberg first filed suit for release of the information via the Freedom of Information Act last November. Last month, U.S. Chief District Court Judge Loretta Preska issued a 47-page order demanding that the Federal Reserve, on behalf of the taxpayer, provide information detailing recipients of funding or loans and participants in the Federal Reserve’s emergency programs.
The deadline for complying with the order was August 31, but the Fed filed for and was granted a stay until September 30 at which point it must either comply or file an appeal.
The Fed and banks have argued that divulging the information could negatively impact the public’s confidence in some institutions and that the prospect of public disclosure might give banks pause in the future when contemplating participation in emergency programs involving the Fed. The Fed appears to have much of the banking industry on its side. If the Fed and those in the banking industry are correct, then an opening of the books to public viewing could lead to increased volatility in financials and, potentially, negative pressure on some institutions.
If no appeal is filed or if an appeal is rejected, here’s a slate of important banking and financial sector ETFs to keep an eye on: XLF, IYF, IYG, IAI, IAT, KBE, KRE, KCE, KIE and VFH.
The President, having expressed a commitment to transparency, is faced with an interesting dilemma: any appeal filed this week would be spearheaded by Solicitor General Elena Kagan – who reports to the President’s Attorney General Eric Holder.
With activities of the Federal Reserve presently so deeply imbued with the economic (and investment) landscape, this case may serve as a defining moment in relation to the extent and form of information on Federal Reserve activities and the banking system to which the public has access during the coming years.
