Judicial Watch Asks Court to Force Release of Documents on Bailout of The Bear Stearns Companies, Inc.
MARCH 25, 2010
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it filed a memorandum of law on March 8, 2010, in its Freedom of Information Act (FOIA) lawsuit against the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System on behalf of former FDIC employee Vern McKinley to obtain documents related to the bailout of Bear Stearns Companies, Inc. Judicial Watch filed a FOIA lawsuit against the FDIC on behalf of Mr. McKinley on March 15, 2010, seeking information related to the Citigroup and Bank of America bailouts. Both lawsuits are part of Judicial Watch’s comprehensive investigation to determine under what legal authorities and lawful rationales the federal government initiated these financial bailouts.
The Bear Stearns lawsuit, originally filed by Mr. McKinley in July 2009, seeks records related to the Board’s unprecedented departure from standard procedure in authorizing the Federal Reserve Bank of New York (FRBNY) to provide “temporary emergency financing” to The Bear Stearns Companies, Inc., on March 14, 2008 (McKinley v. Federal Deposit Insurance Corporation, et al., Civil Action No. 09-1263 ESH). Specifically, the Board authorized the FRBNY to extend a “nonrecourse loan” to JP Morgan, which in turn provided the financing to Bear Stearns.
Mr. McKinley specifically seeks “supporting memos and other information” that the Board used to justify its decision. Following the filing of Mr. McKinley’s lawsuit, the Board released 128 pages of publicly available records and an additional 53 pages of heavily redacted material. Judicial Watch maintains this response is inadequate and unlawful and now asks the court to rule in favor of Mr. McKinley and order the Board to release the documents.
According to Judicial Watch’s memorandum of law, filed on March 8, 2010, “This case…implicates the quintessential purpose behind FOIA — piercing the veil of government secrecy and opening agency action to the light of public scrutiny.” Calling attention to the extraordinary nature of the action taken by the FDIC Judicial Watch noted, “Not since the Great Depression had the Board exercised its authority…to authorize a loan to a non-banking entity.”
Judicial Watch also filed a second lawsuit on March 15, 2010, seeking records related to the FDIC’s decision to guarantee $306 billion of loans and securities held by Citigroup, Inc., and $118 billion held by Bank of America (McKinley v. Federal Deposit Insurance Corporation, Case 1:10-cv-00420).
Mr. McKinley filed his original FOIA requests regarding these specific bailouts on December 4, 2009, and December 20, 2009, respectively. In addition, Mr. McKinley filed a third FOIA request on December 20, 2009, regarding the FDIC’s Temporary Liquidity Guarantee Program, which, according to the FDIC, was established to “strengthen confidence and encourage liquidity in the banking system” by guaranteeing unsecured debt and by “providing full coverage of non-interest bearing deposit transaction amounts regardless of dollar amounts.” Mr. McKinley seeks access to “minutes and supporting memos” from the FDIC Board of Directors meetings that preceded all three.
After granting itself 10-day extensions to process Mr. McKinley’s FOIA requests, the FDIC has failed to respond in any substantial manner to these requests, and has not released a single record. Nor has the FDIC indicated when these records will be forthcoming.
Ironically, the Obama administration has refused to release documents that were generated by the Bush administration. The documents also relate to decisions made by FRBNY president Tim Geithner, who is now Treasury Secretary.
“These lawsuits go to the heart of the government’s decision to commit hundreds of trillions of dollars in massive corporate bailouts. The government’s response to the so-called financial crisis was extreme and unprecedented and we deserve to know how and why these decisions were made. The American people need to be assured that the government exercised proper authority under law in executing these bailouts,” said Judicial Watch President Tom Fitton. “The Obama administration’s stonewalling on these key bailout documents blows out of the water the notion that this president is truly committed to government transparency.”