In a major victory for the business press and anyone who longs for more transparency at the Federal Reserve, a federal judge in New York ruled on Tuesday that the Fed must fork over financial rescue records to two Bloomberg journalists. The reporters, Mark Pittman and Craig Torres, had sued the Fed's board of governors after it refused to hand over bailout-related documents. What's more, the Fed had refused to search for certain information relating to its actions in early 2008—namely, when the Fed's New York branch loaned JPMorgan Chase nearly $13 billion to buy Bear Stearns. (JPMorgan and Bear Stearns ended up paying back the $13 billion loan plus $4 million in interest.)
The Fed's bailout manuevers have come under criticism from members of Congress (especially Rep. Alan Grayson (D-Fla.)) and the media, including our own Nomi Prins. Like when the Fed let Goldman Sachs use investment-bank risk models even after it had converted into a bank holding company in order to qualify for bailout funds, allowing Goldman to make big-time, risky bets with taxpayers' money.
Needless to say, this is an important victory for the press covering the bailout, and for shedding some light on the incredibly opaque actions the Fed has taken to rescue the financial system. The decision's timing couldn't be better. It comes right after Fed chairman Ben Bernanke was nominated for a second term, so closer scrutiny of his decisions when the economy was near rock-bottom will be in the spotlight. The decision also comes as the Treasury Dept. weighs letting the Fed play a larger role in financial regulation by monitoring those "too big to fail" banks in our system—an idea I and others strongly oppose. I'll be curious to see what those two crusading Bloomberg reporters turn up.