On Tuesday, Judge Loretta Preska, Chief Judge in the Southern District of New York, ruled that the Federal Reserve must produce, under the Freedom of Information Act (FOIA), a wide range of documents relating to its exercise of its emergency lending powers. On November 7, 2008, Bloomberg LP filed suit against the Federal Reserve for failure to disclose the names of the financial institutions to which it lent money, the amount of money lent, and the assets put up as collateral under eleven Federal Reserve programs initiated to combat the current financial crisis. The Federal Reserve argued that it was not required to search for documents at the Federal Reserve Bank of New York (FRBNY) and that many of the documents in the possession of the Federal Reserve Board were exempt from disclosure under FOIA exemptions 4 and 5.

The court rejected the Federal Reserve's assertion that it was not required to search any records at the FRBNY, since certain records at the FRBNY are designated by Federal Reserve regulations as "Records of the Board" subject to FOIA. The more serious issues revolved around the Federal Reserve's assertion of FOIA exemptions 4 and 5. The Federal Reserve did not articulate potential harm to individual institutions, but generally argued that the requested records should be exempt from disclosure on the grounds that disclosure would reveal important trade secrets and potentially frighten depositors into pulling their deposits from the named banks. Judge Preska rejected this argument and reasoned that the Federal Reserve “essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed.” She went on to state that “[c]onjecture, without evidence of imminent harm, simply fails to meet the Board’s burden of proof.”

This ruling requires that the Federal Reserve produce the documents by August 31, 2009. The Federal Reserve has asked Judge Preska to stay the order until the U.S. Court of Appeals can hear its appeal.