For over a year, the Federal Reserve has refused to publicly identify the companies that received over two trillion dollars through its emergency lending programs, claiming that disclosure of such records would put the recipients at a competitive disadvantage.
Now, the ultimate decision on the Fed's appeal of a judicial order to release those records rests with the government's top lawyer, Solicitor General Elena Kagan, who has been a strong proponent of the need for transparency in government.
The Fed has fought against public disclosure, arguing "it will cause irreparable harm to the institutions whose information is disclosed and to the Board's ability to effectively manage the current, and any future, financial crisis." The central bank also has refused to disclose the amounts or the assets put up as collateral under 11 emergency lending programs.
Bloomberg News, which filed the request for documents under the Freedom of Information Act (FOIA), argues that the information is "central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression. The information we seek will shine the disinfectant of sunlight on one of the core causes of our current financial crisis."
Essentially, the public doesn't know who got taxpayer money through the lending programs, what the recipients paid for it or whether the taxpayers are getting a good deal.
Since last November, the fight between Bloomberg News and the Fed has been fought in a New York courtroom. Last month, Manhattan Chief U.S. District Judge Loretta Preska ruled against the Fed, giving it five days to turn over the documents but the central bank quickly appealed the decision.
Now the decision is in the hands of Kagan, an Obama appointee, who has until Sept. 25 to authorize the Fed's appeal.
On his first full day in office, Obama pledged transparency in his administration -- and singled out FOIA.
"The Freedom of Information Act is perhaps the most powerful instrument we have for making our government honest and transparent, and of holding it accountable," he said Jan. 21. "And I expect members of my administration not simply to live up to the letter but also the spirit of this law."
Kagan, who left her post as dean of Harvard Law School to join the administration, has written about the need for transparency. In a 2001 law review article about presidential administration and bureaucracy, she noted:
"Bureaucracy is the ultimate black box of government ... [it] is impervious to full public understanding, much less control. But for this very reason, the need for transparency, as an aid to holding governmental decisionmakers to account, here reaches its apex."
A raft of news organizations, including Dow Jones, the New York Times, the Associated Press and Gannett Newspapers plan to side with Bloomberg by filing a friend of the court brief, Bloomberg notes.
A spokeswoman for the Department of Justice said Kagan's office is reviewing the case. No decision has been made.
In an editorial, Bloomberg News Editor-in-Chief Matthew Winkler wrote:
"This is an opportunity for President Obama to make good on his promise to create the most transparent government. By forgoing an appeal, he can show that he means what he says.
What he says is correct. Transparency promotes accountability. So far, there has been much too little of it when it comes to the use of our money to save the banks that failed their shareholders and creditors."