Press group wants Fed’s bank aid disclosed faster
WASHINGTON — A provision in Congress' proposed overhaul of financial regulation that aims to shed more light on the work of the Federal Reserve is drawing fire for allowing the central bank to keep some transactions under wraps for up to two years.
A coalition of journalism organizations maintains in a message to its members that the delay in disclosure presents a threat to open government. The Associated Press is a member of the coalition.
The provision is part of a broader section of the bill that expands congressional scrutiny of the Fed by making its emergency lending, low-cost loans and its buying and selling of securities to implement interest-rate policy subject to audits by Congress' investigative arm, the Government Accountability Office.
But under the bill's terms, the Fed would not have to disclose details of its emergency lending for one year and its discount lending and securities transactions could remain out of public view for up to two years.
“It's important the public know how the Fed's operating and which financial institutions are receiving support,” said Rick Blum, coordinator of the Sunshine in Government Initiative, the journalism coalition. “We're just hoping that the public can have more timely access.”
The Fed had resisted broad audits of its transactions, fearing they could interfere with its independence in setting monetary policy and dissuade financial firms from using Fed lending facilities when they need them.
Testifying before Congress in February, Fed Chairman Ben Bernanke said the disclosure time lag was necessary to prevent roiling the markets.
Bernanke said he didn't want investors to perceive a firm's use of Fed lending as a sign of financial problems, “thereby undermining market confidence in the institution or discouraging use of any future facility that might become necessary to protect the U.S. economy.”
Steve Adamske, spokesman for House Financial Services Committee Chairman Barney Frank, said the House-Senate panel that assembled the bill wanted to avoid creating conditions in which disclosure could affect stock prices.
“We didn't want to have the government influencing any market-making operation,” he said.
The bill has already passed the House and is awaiting a mid-July vote in the Senate. The bill, which at this point cannot be amended, does give the Fed chairman the authority to release bank data earlier than one or two years.
“We hope that they would use this authority very, very judiciously and maximize public disclosure,” Blum said.