Friday, October 29, 2010

The Treasury Board to Bloomberg FOIA boost nose asks Citi guarantees

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In Rudy Giuliani’s second term as mayor, the famed backer of law n’ order had a great fondness for taking it into his own hands. Groups that wanted to assemble on the steps of City Hall were required to file a notice or petition of some sort. A peculiar ritual would then ensue. The mayor’s office would deny the request, the group in question would seek a court order to allow their little protest to go ahead, and without fail, permission would be granted.

It was a form of petty harassment, an abuse of official power and a waste of everyone’s, particularly the court’s, time.

The Obama Administration and the Fed are engaging in precisely the same tactics to deny access to what ought to be public property, in this case, information about how taxpayer funds were utilized during the crisis. And that means not just the TARP, but the many other handouts to banks, including guarantees, regulatory forbearance, the operation of various rescue facilities and programs (arguably, the slightly over $1 trillion in MBS purchases was aimed at banks, not borrowers), and other hidden subsidies.

Predictably, the Obama administration promised transparency and instead delivered foot dragging and obfuscation. Bloomberg provides an unpleasant but nevertheless illuminating account of how a request by its reporter Mark PIttman for information regarding the November 2009 bailout of Citigroup was treated with what amounts to contempt. I say “what amounts to” because the Treasury did bother complying with the form of the FOIA inquiry.

Note that past efforts by the officialdom to withhold information on actions during the financial crisis haven’t fared too well. Pittman also submitted a FOIA asking the Fed to divulge the names of banks that took emergency loans. The Fed refused, and Bloomberg won in district court and on appeal. The Fed has until October 26 to decide whether to appeal to the Supreme Court. Similarly, the Fed refused to disclose the holdings of Maiden Lane III, one of its two AIG rescue vehicles, arguing disclosure of the information would impair its ability to realize maximum value for the public (the argument was that by divulging its transactions, it would give traders and advantage). Tom Adams prepared an analysis that we published on Naked Capitalism that showed that over 80% of the Maiden Lane III transactions were already public, and one could put together considerable detail about each deal, again strictly from public sources (see here, here and here). Representative Darrel Issa later released all the transaction level detail .

There is simply no excuse for withholding the information at issue. These are matters that happened two years ago; they can have no commercial impact upon Citigroup. It’s clear who this secrecy is designed to protect, and that’s them officialdom.

Nevertheless, the Treasury cites an incredibly litany of “trade secrets, personnel rules and practices, memos subject to attorney-client privilege and violations of personal privacy.” This list was used to justify gutting 560 pages of e-mails between the Treasury and the Fed, redacting to uselessness another 104 pages of schedules, and withholding another 886 pages of documents. I’ve had financial firm clients who’ve won cases based on violation of trade secrets. It’s an incredibly tough standard to meet. I guarantee in general that Citi does not take the steps necessary for mere securities ownership to qualify as a trade secret, nor does positions held into nearly two years ago qualify on a practical basis.

Here are some more examples of the contempt with which the Administration treats the public. From Bloomberg:

The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used.

More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!”

None of the documents answers Pittman’s request for “records sufficient to show the names of the relevant securities” or the dates and terms of the guarantees. Even so, the U.S. government considers the collection of e-mails a partial response to an official request under the federal Freedom of Information Act, or FOIA. The Justice Department in July cited an increase in such responses as evidence that “more information is being released” under the law….

And get a load of the runaround:

Pittman’s request for the Treasury Department records spent months in limbo, according to discussions with the agency’s employees. He had waited about 10 months for a response when he died on Nov. 25, 2009. Shortly afterward, Michael Galleher, an attorney working on contract for the Treasury Department, called Bloomberg News, asking where he could send the responsive documents. Attempts to return Galleher’s call failed; he couldn’t be found at the agency.

A December call to Gilmore, the FOIA liaison, was returned by Daneisha White, a FOIA officer, who suggested calling Michael C. Bell, the FOIA manager in the Office of Financial Stability. Bell referred questions back to Gilmore.

Meanwhile, that month, Citigroup repaid $20 billion of its bailout money and terminated the asset guarantees.

Gilmore called back in January, saying Galleher had left the agency at the end of 2009. He and his colleagues would search for Pittman’s FOIA documents, he said, because they weren’t sure where they were.

In April came a call from Galleher. He said that he had returned to work at Treasury’s FOIA office, that he had the relevant documents for Pittman’s request and that he would send them that week…

In May, Galleher reported that he would have something to send soon. He said the same thing in June, and then in July. Part of the holdup was caused by the governmentwide practice of giving private companies a chance to object to the disclosure of requested documents, he said. Doing so ensures that companies continue to cooperate with the executive branch by providing records without fear they’ll be made public without review, said Pustay of the Justice Department.

And notice we have no explanation of the delay from July to the end of October, an additional three months.

The Obama Administration is clearly taking its playbook straight from the Ministry of Truth.

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