SHOCK & AWE …I’m betting! Thanks to Bloomberg for the lawsuit to DISCLOSE! Notice how both Bloomberg & Huffington are always the ones who go after the banksters…Because they probably don’t use the banksters to fund them!

By David Glovin and Bob Van Voris

March 19 (Bloomberg) — The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.

The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.

The Fed had argued that disclosure of the documents threatens to stigmatize borrowers and cause them “severe and irreparable competitive injury,” discouraging banks in distress from seeking help. A three-judge panel of the appeals court rejected that argument in a unanimous decision.

The U.S. Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”

The opinion may not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court.

Right to Know

If today’s ruling is upheld or not appealed by the Fed, it will have to disclose the requested records. That may lead to “catastrophic” results, including demands for the instant disclosure of banks seeking help from the Fed, resulting in a “death sentence” for such financial institutions, said Chris Kotowski, a bank analyst at Oppenheimer & Co. in New York.

“Whenever the Fed extends funds to a bank, it should be disclosed in private to the Congressional oversight committees, but to release it to the public I think would be a horrific mistake,” Kotowski said in an interview. “It would stigmatize the banks, it would lead to all kinds of second-guessing of the Fed, and I don’t see what public purpose is served by it.”

Senator Bernie Sanders, an Independent from Vermont, said the decision was a “major victory” for U.S. taxpayers.

“This money does not belong to the Federal Reserve,” Sanders said in a statement. “It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone.”

Fed Review

The Fed is reviewing the decision and considering its options for reconsideration or appeal, Fed spokesman David Skidmore said.

“We’re obviously pleased with the court’s decision, which is an important affirmation of the public’s right to know what its government is up to,” said Thomas Golden, a partner at New York-based Willkie Farr & Gallagher LLP and Bloomberg’s outside counsel.

The court was asked to decide whether loan records are covered by FOIA. Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets.

The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”

Payment Processors

The Clearing House Association, which processes payments among banks, joined the case and sided with the Fed. The group includes ABN Amro Bank NV, a unit of Royal Bank of Scotland Plc, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., US Bancorp and Wells Fargo & Co.

Paul Saltzman, general counsel for the Clearing House, said the decision did not address the “fundamental issue” of whether disclosure would “competitively harm” borrower banks.

“The Second Circuit declined to follow the decisions of other circuit courts recognizing that disclosure of certain confidential information can impair the effectiveness of government programs, such as lending programs,” Saltzman said in a statement.

The Clearing House is considering whether to ask for a rehearing by the full Second Circuit and, ultimately, review by the U.S. Supreme Court, he said.

Deep Crisis

Oscar Suris, a spokesman for Wells Fargo, JPMorgan spokeswoman Jennifer Zuccarelli, Bank of New York Mellon spokesman Kevin Heine, HSBC spokeswoman Juanita Gutierrez and RBS spokeswoman Linda Harper all declined to comment. Deutsche Bank spokesman Ronald Weichert couldn’t immediately comment. Bank of America declined to comment, Scott Silvestri said. Citigroup spokeswoman Shannon Bell declined to comment. U.S. Bancorp spokesman Steve Dale didn’t return phone and e-mail messages seeking comment.

Bloomberg, majority-owned by New York Mayor Michael Bloomberg, sued after the Fed refused to name the firms it lent to or disclose loan amounts or assets used as collateral under its lending programs. Most of the loans were made in response to the deepest financial crisis since the Great Depression.

Lawyers for Bloomberg argued in court that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money.

“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Golden wrote in court filings.

Potential Harm

Banks and the Fed warned that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell- off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued.

Much of the debate at the appeals court argument on Jan. 11 centered on the potential harm to banks if it was revealed that they borrowed from the Fed’s so-called discount window. Matthew Collette, a lawyer for the government, said banks don’t do that unless they have liquidity problems.

FOIA requires federal agencies to make government documents available to the press and public. An exception to the statute protects trade secrets and privileged or confidential financial data. In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said the exception didn’t apply because there’s no proof banks would suffer.

Tripartite Test

In its opinion today, the appeals court said that the exception applies only if the agency can satisfy a three-part test. The information must be a trade secret or commercial or financial in character; must be obtained from a person; and must be privileged or confidential, according to the opinion.

The court said that the information sought by Bloomberg was not “obtained from” the borrowing banks. It rejected an alternative argument the individual Federal Reserve Banks are “persons,” for purposes of the law because they would not suffer the kind of harm required under the “privileged and confidential” requirement of the exemption.

In a related case, U.S. District Judge Alvin Hellerstein in New York previously sided with the Fed and refused to order the agency to release Fed documents that Fox News Network sought. The appeals court today returned that case to Hellerstein and told him to order the Fed to conduct further searches for documents and determine whether the documents should be disclosed.

“We are pleased that this information is finally, and rightfully, going to be made available to the American public,” said Kevin Magee, Executive Vice President of Fox Business Network, in a statement.

Balance Sheet Debt

The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.

More than a dozen other groups or companies filed friend- of-the-court briefs. Those arguing for disclosure of the records included the American Society of News Editors and individual news organizations.

“It’s gratifying that the court recognizes the considerable interest in knowing what is being done with our tax dollars,” said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press in Arlington, Virginia.

“We’ve learned some powerful lessons in the last 18 months that citizens need to pay more attention to what’s going on in the financial world. This decision will make it easier to do that.”

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net; Bob Van Voris in New York at vanvoris@bloomberg.net.

Last Updated: March 19, 2010 16:15 EDT

also see  huffington post articles on this

March 11, 2010, 6:15 PM ET

‘Hail Mary’ to Warren Buffett: Untold Details of Lehman’s Fall

By Matt Phillips

Doubtless, historians will be going over the mammoth 2,200 page report from the Lehman bankruptcy examiner for years to come.

But we bloggers are writing the first draft now. And there’s plenty of good fodder on Lehman’s final days, including fresh details on its effort to get support from billionaire investor Warren Buffett.

Now, it’s well known that Lehman reached out to Buffett in its final months. The Journal’s Scott Patterson wrote about the Oracle’s decision to pass on Lehman in a story back in December.

But the level of detail provided by this report is pretty astounding. It offers a pretty amazing snapshot of Buffett’s conversation with Lehman CEO Dick Fuld as well as a remarkable window on how the Oracle negotiates during times of crisis.

The report really reads like a novel, so we’ll just give you the sections here:

Fuld and Buffett spoke on Friday, March 28, 2008. They discussed Buffett investing at least $2 billion in Lehman. Two items immediately concerned Buffet during his conversation with Fuld. First, Buffett wanted Lehman executives to buy under the same terms as Buffett. Fuld explained to the Examiner that he was reluctant to require a significant buy?in from Lehman executives, because they already received much of their compensation in stock. However, Buffett took it as a negative that Fuld suggested that Lehman executives were not willing to participate in a significant way. Second, Buffett did not like that Fuld complained about short sellers. Buffett thought that blaming short sellers was indicative of a failure to admit one’s own problems.

Following his conversation with Buffett, Fuld asked Paulson to call Buffett, which Paulson reluctantly did. Buffett told the Examiner that during that call, Paulson signaled that he would like Buffett to invest in Lehman, but Paulson “did not load the dice.” Buffett spent the rest of Friday, March 28, 2008, reviewing Lehman’s 10?K and noting problems with some of Lehman’s assets. Buffett’s concerns centered around Lehman’s real estate and high yield investments, lending?related commitments derivatives and their related credit?market risk, Level III assets and Lehman’s securitization activity. On Saturday, March 29, 2008, Buffett learned of a $100 million problem in Japan that Fuld had not mentioned during their discussions, and Buffett was concerned that Fuld had not been forthcoming about the issue. The problems Buffett saw in the 10?K along with Fuld’s failure to alert Buffett to the issue in Japan cemented Buffett’s decision not to invest in Lehman.

At some point in their conversations, Fuld and Buffett also discovered that there had been a miscommunication about the conversion price. Buffett was interested only in convertible preferred shares. Buffett told Fuld that he was willing to agree to a $40 conversion price per share, while Fuld thought Buffett was offering to buy in at “up? 40,” or 40% above the current market price, which would have been about $56 per share. On Friday, March 28, 2008, Lehman’s stock closed at $37.87. Fuld spoke to Lehman’s Executive Committee and several Board members about his conversations with Buffett. Lehman recognized that an investment by Buffett would provide a “stamp of approval.” However, Lehman already had better offers for its April capital raise, and Lehman did not think it could give a better deal to Buffett at the same time it gave a less attractive deal to others. On Monday, March 31, 2008, before Buffett could tell Fuld that he was not interested, Fuld called Buffett to say that Lehman could not accept his terms.

Last?Ditch Effort with Buffett

[Hugh “Skip” E. McGee, III, the head of Lehman’s Investment Banking Division] contacted [President David L. Sokol, president of Berkshire Hathaway’s MidAmerican Energy] again in late August or early September 2008 and outlined Lehman’s “Gameplan” for survival, specifically SpinCo. During a subsequent telephone call with Sokol, McGee explained the “good bank/bad bank” scenario and stated that Lehman would need an investor. Sokol believed the e?mail and call were intended to induce Sokol to pass that information on to Buffett, so Sokol briefed Buffett on SpinCo. Buffett thought the idea would not solve Lehman’s problems.

Sometime during the week prior to Lehman’s bankruptcy, McGee again reached out to Sokol with what both Sokol and McGee described to the Examiner as a “Hail Mary” pass. McGee asked, “Do you have any ideas to save us?” Sokol, who was bear hunting in Alaska at the time, told McGee that he did not.

Judging by the inclusion of the largely irrelevant bear hunting detail at the end, we can tell that this report was written by a frustrated novelist. (And they did an amazing job.) But what we find most remarkable is the insight these sections offer on how Buffett assesses companies.

It’s simple–but not easy–as he combines 10-K analysis with probing questions to management.

Are they willing to put their own money at risk? Are they being upfront? Are they giving investors the full story?

Clearly Buffett didn’t think so.

Huffingtonpost.com 3/9/2010

The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday. Instead, the official said, the Treasury prefers a substitute offered by Rep. Mel Watt (D-N.C.), and would like to see it enacted as part of the Senate bill.

The Watt measure, however, while claiming to increase transparency, actually puts new restrictions on the GAO’s ability to perform an audit.

Secretary Tim Geithner, Assistant Treasury Secretary Alan Krueger and Gene Sperling, a counselor to the secretary, held a briefing Monday with new media reporters and financial bloggers during which they discussed the Fed audit and other topics. Under the briefing’s ground rules, the officials could be paraphrased but not quoted, and the paraphrase could not be connected to a specific official.

HuffPost reporter Sam Stein lodged what he called a “formal complaint” against the ground rules. The complaint was noted and the briefing began.

Asked whether he supports the House-passed measure to open the Fed to an audit, which was cosponsored by Reps. Alan Grayson (D-Fla.) and Ron Paul (R-Texas), a senior Treasury official said he is intensely opposed to it.

The official said the measure would undermine the independence of monetary policy and could restrict the ability of the Fed to act in times of crisis. He said that the GAO already has audit authority and that the chairman routinely testifies before Congress.

He said he supports full disclosure when it comes to the scale of Fed lending and wouldn’t draw a bright line around auditing certain activities, but wants to make sure it maintained its independence.

The Watt measure, however, while claiming to increase transparency, actually puts new restrictions on the GAO’s ability to perform an audit.

Secretary Tim Geithner, Assistant Treasury Secretary Alan Krueger and Gene Sperling, a counselor to the secretary, held a briefing Monday with new media reporters and financial bloggers during which they discussed the Fed audit and other topics. Under the briefing’s ground rules, the officials could be paraphrased but not quoted, and the paraphrase could not be connected to a specific official.

HuffPost reporter Sam Stein lodged what he called a “formal complaint” against the ground rules. The complaint was noted and the briefing began.

Asked whether he supports the House-passed measure to open the Fed to an audit, which was cosponsored by Reps. Alan Grayson (D-Fla.) and Ron Paul (R-Texas), a senior Treasury official said he is intensely opposed to it.

The official said the measure would undermine the independence of monetary policy and could restrict the ability of the Fed to act in times of crisis. He said that the GAO already has audit authority and that the chairman routinely testifies before Congress.

He said he supports full disclosure when it comes to the scale of Fed lending and wouldn’t draw a bright line around auditing certain activities, but wants to make sure it maintained its independence.

A lack of independence, he said, could lead to inflation and otherwise undermine progressive priorities.

He said, however, that he would be supportive of efforts that would help the Fed earn back some of the credibility it has lost over the past few years.

HuffPost asked if central bank liquidity swaps — foreign currency trades worth hundreds of billions of dollars — should be subject to an audit. The official said that the identity of the countries that received dollars was made public as was the amount each got. It worked well and was good policy, he said, and opening it to audit could undermine its future effectiveness.

The purpose of the swaps, he said, was to make sure that foreign central banks had enough dollars to meet their obligations. The effort kept interest rates low, he said.

A member of Congress, told of the unnamed Treasury official’s comment, asked not to be named and said that Geithner, a former Fed president, should recuse himself from Fed audit legislation discussions, given that the audit would cover his own actions during the crisis.

And Rep. Grayson said he finds Treasury’s opposition to the audit troubling. “There is a growing feeling on the part of real Democrats that the president is getting bad advice from people who have sold out to Wall Street,” said Grayson. “And opposing a measure that passed overwhelmingly in the House with bipartisan support at the [Financial Services] Committee level, based up on legislation that now has 317 cosponsors in the House, shows that the president may be getting bad advice.”

The idea that the Fed’s mission would be undermined by an audit, said Grayson, “is a scarecrow erected by people who want to cover up the actions of the Fed for their own purposes, including those who actually have worked at part of the Fed, to prevent accountability at any cost.”

Geithner served as president of the New York Fed during the financial crisis.

“It’s interesting that the Fed regards the simple fact that people find out what it does as somehow being unduly restrictive. We are a government of laws, not of men,” said Grayson.

“It’s certainly no surprise that banking insiders at Treasury don’t want transparency at the Fed,” said Jesse Benton, a spokesman for Rep. Paul. “They are wrapped up in the central bank shenanagins too, and do not want their wheelings and dealings out in the open any more than Alan Greenspan or Ben Bernanke,”

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