The gloves came off last week in an ongoing scuffle between the Federal Reserve and Bloomberg news.
The first punch was thrown in May 2008, when a Bloomberg reporter named Mark Pittman filed a Freedom of Information Act request with the Fed. Pittman wanted details of the Fed’s emergency lending during the financial crisis. The Fed rejected the request.
The central banks reasoning was that releasing information about their lending would have resulted in depositor runs and a sell-off of banks. That reasoning didn’t sit with Bloomberg. Bloomberg LP eventually sued the Fed, and won. And in December of 2010, as a requirement under Dodd-Frank, the Fed was forced to disclose the details of most of its emergency lending during and after the crisis.
The fight got ugly last month, when Bloomberg reported that from 2007 to 2009 the Fed made “secret” aid available totaling $7.7 trillion. And that cheap money from the Fed allowed banks to pocket $13 billion in profits over that two year period.
Now the Fed is lashing out. Without explicitly naming Bloomberg, Fed Chairman Ben Bernanke said that a “series of recent articles” contained “egregious errors and mistakes”. The reported numbers are “wildly inaccurate”, and the volume of outstanding loans never exceeded $1.5 trillion at any one time.
Bloomberg was reporting on the limits of the Fed’s lending ability and guarantees, specifically what the Fed “lent, spent or committed”. And it was called “secret” because while general outlines were released, specifics were not.
The point here is that Bloomberg, and the markets, want a clear picture of what is going on at the Fed. During his nomination hearing in 2005, Fed Chairman Ben Bernanke said that transparency “increases democratic accountability”. To be fair, the Fed is managing its message better. During the financial crisis, the Fed consistently said that interest rates would remain low for an “extended period”; in August the Fed clarified that rates would be low “at least through 2013”. Chairman Ben Bernanke is now hosting press conferences following Fed interest rate decisions. The minutes of the Fed’s November meeting contained more information than has ever been revealed before.
Bloomberg doesn’t like secrets. Neither does the market, or the public. But we’ve got to give the Fed credit where credit is due, and every step that incrementally increases the transparency of their actions is a welcome one.