A federal court has ordered the Federal Reserve to reveal the terms of its $1.5 trillion in loans to big banks during the Financial Crisis in response to a newspaper freedom of information act request.
A declaration filed by the banks as part of an end run around that order claims that revealing this information would produce a second financial crisis.
I simply do not buy it. These institutions are overwhelmingly publicly held and probably have an independent obligation to disclose the transactions to their shareholders anyway. The information requested is purely factual in nature. As such, changes that occur in response to it should be more accurate than the speculation currently in place. If the information shows that the banks really are in much worse shape than currently believed by market participants, we will pay for it sooner or later anyway.
When you borrow money from the nation's central bank, acting pursuant to its emergency powers when it is acting to carry out a President's policy response to a financial crisis, you don't have a reasonable expectation of privacy. Private contracts are not normally immune to subpeona power, and contracts made with governmental power are not normally immune to FOIA requests. Even litigation settlements are routinely a matter which the public may insist be disclosed. In many markets (e.g. real estate), public disclosure of transactions is required as a matter of law, and post-financial crisis legislation proposes to expand the scope of transactions that must be publicly disclosed.
The point of emergency lending is postpone a collapse during a widespread panic, until reason can prevail in realizing that the world is not coming to an end. It is not to permanently bury the truth.
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