Legal News

US Fed won't join banks in appeal to Supreme Court

By (Breaking Legal News)

The Federal Reserve has decided not to join major banks in asking the US Supreme Court to let the central bank keep secret the details of its emergency lending programs during the financial crisis.

A group representing US and European commercial banks on Tuesday appealed to the Supreme Court asking it not to force the Fed to disclose details of its bailouts, as a federal appeals court in New York had ordered in March.

The group said forcing disclosure could lead markets and customers to worry about banks' health, jeopardizing their business prospects.

The Fed did not explain why it chose not to join the banks' appeal. In a statement, it said it "will await a determination from the courts and will comply fully with any final order. The Federal Reserve remains committed to timely and responsible transparency of its operations."

Bloomberg LP, the parent of Bloomberg News, and News Corp's Fox News Network had sought bailout details under the federal Freedom of Information Act, which requires government agencies to make documents public.

The Supreme Court is expected in coming weeks to consider whether to review the unanimous March ruling by the second US Circuit Court of Appeals in New York ordering the Fed to release details of programs it adopted starting in late 2007 to shore up the financial system.

These programs, along with other measures to support the economy, more than doubled the central bank's balance sheet to well over USD 2 trillion, a process that accelerated after Lehman Brothers Holdings Inc's September 2008 collapse.

"The Fed has historically argued that you could have bank runs if you had disclosure, and that it did not want to enable these by having super-timely disclosure of problems," said William Ford, a professor at Middle Tennessee State University and former president of the Federal Reserve bank in Atlanta. "But we're already moving in the direction of full and immediate disclosure, quite aside from the legal battles."

Walker Todd, research fellow at the American Institute for Economic Research and a former Fed legal officer in Cleveland and New York, said the banks group  the Clearing House Association LLC  might be more likely to have its appeal heard without the Fed's involvement.

Full post as published by Breaking Legal News on October 27, 2010 (boomark / email).