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Here’s a little secret the Federal Reserve Board doesn’t want you to know. On Sept. 24, 2008, while financial markets were collapsing, Morgan Stanley borrowed $3.5 billion through the Fed’s oldest lending program, the 98-year- old discount window.
The Fed has long claimed that releasing this type of data could trigger bank runs, public hysteria, death spirals at financial institutions large and small, and other horrible outcomes. Yet I’ve got a hunch Morgan Stanley somehow will survive this revelation. Mass panic will not ensue. The world will not end.
This is the kind of information the late Bloomberg News reporter Mark Pittman was seeking when he filed a Freedom of Information Act request with the Fed in May 2008, nine months after the financial crisis began. Among other things, he asked for documents showing which banks had borrowed money under the Fed’s emergency-lending programs and the details of those loans.
The Fed blew off his request. Bloomberg LP, the parent of Bloomberg News, responded by suing the central bank. The company won both at the district court level and on appeal. This week, the Supreme Court decided to let those rulings stand. And so almost three years after Pittman sent his original FOIA letter, the Fed finally will have to comply with the law.
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This whole sorry exercise by the Fed has shown the central bank at its worst. The Fed lost on the merits. Yet it succeeded in serving notice that anyone who challenges its judgments must be prepared to spend absurd amounts of time and money on litigation as the price for busting its wall of secrecy and holding its leaders accountable.
Most citizens, and news organizations, would be deterred by such tactics. Mark Pittman, who died on Nov. 25, 2009, must be smiling.
Full article here: Morgan Stanley’s Deep Secret Now Is Revealed: Jonathan Weil – Bloomberg.
Photo credit: Jr. Deputy Accountant
