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Learning the Truth About the Bailouts

By CREW Staff

Why does the federal government keep trying to keep secret the details of the financial bailout? You know, the one all of us paid for.

The latest incident involves a Freedom of Information Act (FOIA) request by Bloomberg News to the Treasury Department for records related to hundreds of billions of dollar worth of toxic securities owned by Citigroup the government agreed to guarantee in November 2008. At that time, fears about the bank's financial health led to concerns it could go under without government intervention. Treasury agreed to guarantee more than $300 billion in securities, and upped its direct investment in Citigroup by $20 billion.

So Bloomberg asked Treasury for some details of these massive transactions, including the names of the guaranteed assets and any contracts with outside firms hired to calculate their value. What happened over the next year and a half is sadly familiar. The Bloomberg reporter who made the request, Mark Pittman, died in November 2009 after waiting 10 months with no response. Treasury then dawdled for another 10 months, in part to allow Citigroup to object to disclosure of allegedly confidential financial information.

When Treasury finally coughed up some records, it provided 560 pages of emails that Bloomberg didn't ask for, and those were so heavily redacted to make them largely useless. Even worse, it withheld 866 more pages on various grounds, including that disclosure would reveal trade secrets or confidential financial information.

In other words, even though taxpayers now own a big chunk of Citigroup and guaranteed its worst assets, Treasury believes the public should not be allowed to know any specific information about those assets or how their value was determined.

This is not the first time the federal government has tried to keep secrets these kinds of details. In 2008 and 2009, Bloomberg, Fox Business News, and CREW asked the Federal Reserve Board to disclose which banking institutions had used the Fed's short-term lending programs during the financial crisis, and what collateral they pledged in return for the $2.2 billion in loans. The Feds rejected the requests, also claiming that disclosure would reveal confidential financial information. Bloomberg sued the Feds and won. (CREW withdrew its similar lawsuit after the court's decision.) The judge rejected the government's argument that the information needed to be kept secret to protect against runs on banks that used the programs, concluding that its claims were mere conjecture. An appeals court upheld the ruling and ordered the Feds to disclose the records.

From the beginning of the financial bailout, there have been serious questions about how the hundreds of billions of dollars were spent. Instead of fighting tooth and nail to protect giant banks like Citigroup that caused the crisis in the first place, Treasury should take a cue from the federal case and make itself accountable to the public.