It took an act of Congress and a major lawsuit, but the details of the U.S. Federal Reserve Board's emergency loan programs and discount window lending–which peaked at more than a trillion dollars for the nation's biggest banks and other institutions during the recent financial meltdown–finally came into the light.
Created in 1913, the central bank has always kept details of its activities as the “lender of last resort” closely held. The rationale has been that releasing information about which banks and institutions seek temporary assistance from the Fed could cause runs on banks and panic in the markets.
Never has this secrecy faced a bigger challenge than during and immediately after the recent financial crisis, when the Fed, beginning in 2007, launched an unprecedented raft of programs with an alphabet soup of names—TAF and TALF and TLSF–to help prop up ailing banks and other institutions hit hard when the subprime mortgage market crashed. It also ramped up traditional "discount window" lending, a permanent Fed program through which banks may borrow funds on a short-term basis, and set up currency swap lines with certain foreign central banks. Journalists and some members of Congress began to demand more information about the billions of dollars made available through these programs.
In May 2008 Bloomberg News' reporter Mark Pittman filed a Freedom of Information Act (FOIA) request with Federal Reserve requesting data about details of “discount window” lending and collateral, an act with a certain amount of chutzpah, as the Fed had never made this information public. Unsurprisingly, the central bank stonewalled him.
Meanwhile, the crisis continued to worsen. In September 2008 the investment house Lehman Brothers collapsed. The following month, Congress approved $700 billion in bailout money for the Troubled Asset Relief Program (TARP), to be run by the U.S. Treasury, as opposed to the Fed. The Federal Reserve continued to increase its lending through various emergency programs. The Federal Reserve's balance sheet, made public here, showed enormous increases–but the public had no information about which institutions were benefitting.
In November 2008, Bloomberg News filed a lawsuit challenging the Fed, which had not provided any records to Pittman in response to his request, and had not even provided an official denial that would have enabled him to file an appeal. Fox News Network later filed a similar lawsuit, and other news organizations joined in by filing legal briefs in support.
Some in Congress, from the far left and right also wanted answers. In a May 2009 hearing, Sen. Bernie Sanders (I, Vt.), questioned Federal Reserve Chairman Ben Bernanke point blank about which institutions had received loans through the emergency programs. Bernanke said "no." "The reason that is counterproductive and will destroy the value of the program is that banks won't come to the table," continued Bernanke.
In addition, Rep. Ron Paul, R-Texas launched a campaign to require a public audit of the Fed, sponsoring legislation along with now former Rep. Alan Grayson, D-Fla. However, it was a similar amendment by Sanders, which also required that the Fed disclose details of loans during the crisis, that made it into the final bill.
In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law mandates that the Fed release data on emergency loans made from December 2007 through the date of passage of the law. However, the discount window data sought by Bloomberg and Fox News Network was not included in this requirement. The Fed must also release details of emergency loan facilities in the future–this time including "discount window" details–after a a certain time lag.
The Dodd-Frank law also requires the U.S. General Accountability Office (GAO) to issue two reports–one a general audit of the Fed's emergency loan programs–again excluding the discount window loans–and another that examines whether there were conflict of interest issues raised in the set up of these programs. It also requires audits of new emergency loan programs in the future–but these will not be made public until one year after the program has ended.
In December 2010, the Fed released massive data files about emergency lending programs throughout the crisis. (At the time, the Sunlight Foundation's Ryan Sibley reported on one of them, the Term Asset-Backed Loan Facility (TALF).)
But the Fed did not release details of discount window lending during the crisis to the public until the U.S. Supreme Court ruled that it was required to do so. In March 2011, the court let a lower court's orders stand that required the Fed to release the discount loan data in response to the lawsuits by Bloomberg and Fox News. In doing so, it overruled objections lodged by the Clearinghouse Association, an organization containing the largest commercial banks, which had appealed the lower court's decision. Later that month, the Fed released the data, in the form of 894 PDF files on two CD-ROMS–an awkward format to manipulate and analyze.
Bloomberg News later published an exhaustive analysis that included emergency loan and discount window data here. It showed that the nation's largest financial institutions–Morgan Stanley, Bank of America, State Street Corp–benefitted the most from the extra help. Many foreign banks, such as Deutsche Bank, Barclays, and Credit Suisse Group also ranked near the top. Journalists also plumbed these data for stories such as this one by Matt Taibbi, which showed how two wives of high level Morgan Stanley executives were able to profit from the TALF emergency lending program.
The GAO issued its audit of the Federal Reserve Board lending programs in July 2011, and in October, a House Financial Services Subcommittee chaired by Rep. Paul held a hearing on the findings. The second GAO report, which focuses on conflict of interest, is expected this week.
About the data
What: Details of emergency lending programs and discount window lending by the U.S. Federal Reserve Board
Where: Federal Reserve Board
Availability: In December 2010, the Fed released data on emergency lending programs during the financial crisis, as mandated by the Dodd-Frank financial law. Details can be found here.
After the U.S. Supreme Court let a lower court ruling stand on FOIA lawsuits filed by Bloomberg News and Fox News Network, the Fed released details of discount window lending during the crisis.
The Dodd-Frank financial law requires the Fed to release data on future emergency loan programs one year after the termination of the program.
The law also requires the Fed to release "discount window" data two years after the calender quarter in which the transaction occurred.
Emergency lending data during crisis was released in downloadable, machine readable format.
Discount window lending data from the crisis was released in PDF format on cd-roms.
Dodd-Frank law specifies that future data be released on the Fed's website.