Open the Fed!

November 4, 2011

From the Desk of Judicial Watch President Tom Fitton:

Judicial Watch Petitions Supreme Court over Fed’s Decision to Withhold
Bear Stearns Bailout Documents

American taxpayers are on the hook for who-knows-how-many trillions of dollars in government bailouts/takeovers. And yet, to date, we have little information about how the federal government legally justified unprecedented its use of tax dollars to “bail out” private companies.

Why? Because the Obama administration continues to stonewall the release of documents that would almost certainly shed light on the internal discussions that took place in the Bush administration!

On November 1, 2011, we filed a petition on behalf of former Federal Reserve employee Vern McKinley, asking the U.S. Supreme Court to review a lower court ruling validating the Federal Reserve’s decision to withhold documents about this $29 billion Bear Stearns bailout. (Bailout Nation began with the Bear Stearns bailout in 2008.)

At issue in our Freedom of Information Act (FOIA) lawsuit is whether or not the federal government can withhold documents under the deliberative process privilege of FOIA Exemption 5 without demonstrating that the release of the documents would result in specific harm to government agency decision-making. As you might imagine, the “deliberative process” is loved by government officials who use it to keep as much information as possible about controversial decisions away from the American people.

The United States District Court and the United States Court of Appeals previously ruled in favor of the Federal Reserve and dismissed Mr. McKinley’s lawsuit. However, as Judicial Watch argued in its Supreme Court petition on behalf of Mr. McKinley, these rulings are a departure from Supreme Court precedent and FOIA law:

Despite the plain language of Exemption 5 and this Court’s precedent, the D.C. Circuit has created a different, relaxed two-prong test that a government agency must satisfy to withhold material in the FOIA context…

…By removing the requirement that a government agency must make a specific showing of harm under the deliberative process privilege of Exemption 5, the D.C. Circuit has created a sweeping exemption, causing the FOIA to become more of a withholding statute than a disclosure statute. Petitioner therefore requests that this Court grant certiorari to affirm its reading of Exemption 5 to incorporate the common law deliberative process privilege and to dispose of the different, relaxed test created by the D.C. Circuit.

The Bear Stearns lawsuit, originally filed by Mr. McKinley in July 2009, seeks records of the Board of Governors of the Federal Reserve related to its unprecedented act authorizing the Federal Reserve Bank of New York (FRBNY) to provide “temporary emergency financing” to The Bear Stearns Companies, Inc. Specifically, the Board authorized the FRBNY to extend a “nonrecourse loan” to JP Morgan, which in turn provided the financing to Bear Stearns.

By the way, the head of the Federal Reserve Bank of New York at the time was none other than Timothy Geithner, who is now Obama’s Treasury Secretary.

Now, despite the government’s stonewalling, we did manage to shake loose a few documents in September 2009 that provided a fascinating backdrop to the Bear Stearns deal. These documents included “confidential” term sheets describing the deal, released to the public for the first time, along with behind-the-scenes email correspondence between Treasury officials. According to these records, JP Morgan officials believed Bear Stearns to be “nearly worthless” just hours before the acquisition deal was announced, demonstrating what a sham this deal really was.

The records also show the Bear Stearns bailout was very much in doubt just hours before the deal was announced to the press on Sunday night, March 16, 2008. According to an email sent Sunday morning by FRBNY official Michael Holscher to then-head of the FRBNY and current Treasury Secretary Timothy Geithner, entitled “JPM Findings”:

JPM [JP Morgan] has discovered a large (50bn) structured mortgage position funded by BSC [Bear Stearns Capital], as well as other risk positions that are making them balk on the deal. I have asked for a report on their findings to assess the exposures. They also indicated that BSC’s risk positions are exactly what JPM has avoided in recent years. They estimate the book value of the firm to be nearly worthless…and that risks on other unknowns are to the downside. They inquired about options that the federal government may have to bail out/purchase BSC, we indicated that options are extremely limited.

Ultimately, JP Morgan received the guarantees it needed from the Treasury Department to consummate the deal to prop up the “worthless” Bear Stearns later that evening. But again, we do not know the legal and factual justifications for this unprecedented bailout.

The Bear Stearns records we uncovered are embarrassing enough for government officials. But we are left to imagine what bombshells might be lurking in the documents they continue to withhold.

With his lawsuit, Mr. McKinley specifically seeks “supporting memos and other information” that the Board used to justify the Bear Stearns decision. In response to Mr. McKinley’s request, the Board produced only 48 pages in their entirety and withheld 190 pages in their entirety or in part under Exemption 5.

Not good enough.

Never in American history has so much taxpayer money been spent with so little oversight or explanation. Mr. McKinley believes the American people deserve an explanation from the Federal Reserve about its secretive and massive bailouts – which are still ongoing. But the Federal Reserve, and the Obama administration, are abusing the law and withholding documents without proper justification.

We hope the Supreme Court overturns the erroneous lower court decisions that, if left standing, could eviscerate FOIA law and the public’s right to know what its government is up to.

Incidentally, this lawsuit is just one component of Judicial Watch’s in-depth investigation of the bailouts. This investigation includes additional legal actions made on behalf of Mr. McKinley. Click here for more information.

JW Delivers 85,010 Petitions to Obama Objecting to Unlawful Illegal Alien Amnesty Plan

It does not take a sophisticated analysis of the Obama administration’s immigration policies to know that Barack Obama is doing everything in his power (or, more correctly, above and beyond the scope of his power) to grant amnesty to millions of illegal aliens. This stealth amnesty effort not only defies the rule of law, but also the wishes of the vast majority of American citizens who want our nation’s immigration laws fully enforced.

And this week, 85,010 of these citizens sent a strong message in the form of a Judicial Watch petition directly to the President himself regarding his illegal alien amnesty scheme. Here’s the message: Illegal alien amnesty is immoral, unlawful and harmful to national security.

According to my cover letter accompanying the petitions, which was delivered to the Obama White House on October 19, 2011:

On behalf of over 250,000 active members and supporters of Judicial Watch, I present you with the enclosed list of members who signed the enclosed petition to your attention. They express the wishes of 85,010 citizens who deplore the notion of awarding amnesty to illegal aliens currently residing in the U.S. — because to do so would show contempt for the rule of law and for those individuals who live by the rules and wait their turn to enter the United States legally.

Amnesty for illegal aliens is not only morally wrong, it would harm our nation’s security; it is economically disastrous, and leads to increased crime, especially drug and gang violence. Any “immigration reform” should focus on improved immigration law enforcement and strengthened border security. It must not include amnesty for those individuals who violated our laws by entering our nation illegally.

And certainly, your administration must obey the law and not implement amnesty through administrative measures or under the ruse of prosecutorial discretion.

Remember these phrases, “administrative measures” (or “means”) and “prosecutorial discretion.” Because these innocuous sounding strategies are the means by which the Obama administration intends to execute its dangerous illegal alien amnesty plan. In reality, these policies are being abused to give wide latitude to the Obama administration in order to simply dismiss deportation procedures against illegal aliens – even those guilty of violent crimes – and to ignore federal immigration laws altogether!

For a time, the Obama administration attempted to keep secret its scheme to enact illegal alien amnesty. But that all changed when an internal U.S. Citizenship and Immigration Services (USCIS) memo was leaked to the press. The memo, to USCIS Director Alejandro Mayorkas from USCIS staff, outlined ways by which the Obama administration could bypass Congress to enact amnesty for millions of illegal aliens through “administrative means.”

Following on the heels of this discovery, the Houston Chronicle exposed an effort by the Obama administration to suspend the deportations of illegal aliens that supposedly have not been convicted of any “serious” crimes.

However, Judicial Watch uncovered documents from Immigration and Customs Enforcement (ICE) proving that immigration officials were urged to use “prosecutorial discretion” to dismiss deportation proceedings against a wide variety of illegal alien criminals – including those convicted of serious crimes such as sexual assault, solicitation of murder, aggravated assault, assaulting a police officer, and kidnapping, as well as numerous drug charges.

Judicial Watch, the Houston Chronicle, and watchdogs in Congress (specifically Sen. Chuck Grassley (R-IA)) let the cat out of the bag. And the Obama administration had no choice but to publicly announce its intention to disregard illegal immigration laws by “prioritizing deportations,” yet another example of innocuous sounding bureaucratic-speak designed to obfuscate the true nature of the Obama amnesty scheme.

As Judicial Watch’s petition states, the Obama Administration’s illegal alien amnesty strategy is not only unlawful, but also unconstitutional, violating the separation of powers doctrine:

Whereas, there have been reports that your administration is using its administrative authority to effectively legalize significant numbers of illegal aliens; and,

Whereas, as you know, Congress alone possesses plenary power over making our immigration policy, and when Congress took up the illegal immigration issue in 2006 and 2007, the debate occurred in the proper venue, the legislature; and,

Whereas, if there is to be further debate on U.S. immigration policy, it rightfully should take place in the legislative branch, since executive action should not be used to circumvent Congress’ constitutional authority to legislate immigration policy, especially as it relates to the illegal population in the United States.

FYI, we also copied congressional leadership on our petition letter, including House Speaker John Boehner (R-OH), House Democratic Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV), and Senate Minority Leader Mitch McConnell (R-KY). They should be as outraged as the rest of us that the president is circumventing the legislative branch’s constitutional prerogatives.

These petitions do have an impact. Politicians have no choice but to pay attention to public opinion. Their livelihoods depend on votes so they carefully consider the amount of phone calls and letters they receive from constituents.

And with that in mind I’d like to make yet another push for you to visit our website and join our petition campaign to persuade our nation’s governor’s to enforce our nation’s illegal immigration laws. You can do so by clicking here.

Our petition drive is critical in the effort to protect citizens from the scourge of illegal immigration. Read on and I will show you how critical…

JW Seeks an End to Illegal Alien Tuition Breaks in Rhode Island

Last week, I reported to you that Judicial Watch had earned a critical victory when a court granted JW client MDPetitions.com permission to intervene in a lawsuit that seeks to deny Maryland voters an up-or-down vote on the Maryland DREAM Act (John Doe, et al., v. Maryland State Board of Elections).

We announced this new development during a press conference held in Annapolis, Maryland, in conjunction with the chairman of MDPetitions.com, Maryland Assembly Delegate Neil Parrott of Washington County, and honorary chairman Delegate Patrick McDonough of Baltimore and Harford Counties.

(Click here for last week’s report.) But, in short, illegal immigration lobbyists want voters to be silenced on the issue of discounted tuition for illegal aliens, while we want voters to have an up-or-down vote on the issue next November. All this is in addition to our representation of Maryland taxpayers who are challenging tuition benefits for illegal aliens that are already in place!

While it is true that we often must go to court to challenge illegal support for illegal aliens, sometimes all it takes is a letter to put an end to these policies.

For example, a letter from Judicial Watch was all it took in New Jersey, where we forced the County College of Morris (CCM) to reverse its policy of providing tuition perks to illegal alien students. One CCM trustee said it was the mere “prospect of being sued” that forced the change.

Let’s hope the Rhode Island Board of Governors for Higher Education (RIBGHE) reacts similarly.

On October 19, 2011, we sent a letter to Lorne Adrain, Chairman of RIBGHE, advising him of the unlawful nature of a new illegal alien tuition policy:

We understand that the Rhode Island Board of Governors for Higher Education (“RIBGHE”) recently approved changes to its current student residency policy that are intended to make unlawfully present aliens eligible to pay reduced, in-state tuition rates at Rhode Island’s public universities, colleges, and community colleges. These changes appear to be in clear violation of federal law and must, therefore, be reversed…

…There is no way to reconcile RIBGHE’s new policy with federal law. The new policy provides a public benefit to individuals who clearly are ineligible for such a benefit under section 1621(a) of title 8, and Rhode Island has not enacted a law affirmatively providing for such eligibility under section 1621(d) of title 8. In fact, we understand that the Rhode Island General Assembly rejected proposed legislation earlier this year that would have made unlawfully present aliens eligible for in-state tuition at Rhode Island’s public universities, colleges, and community colleges and that it has rejected similar proposed legislation in prior years.

RIBGHE may not ignore federal laws when those laws are not consistent with its own policy preferences. We hope that RIBGHE will reverse its new student residency policy immediately in order to conform its policy to the requirements of federal law.

Under federal law, unlawfully present aliens generally are ineligible for state or local public benefits, including post-secondary education benefits such as reduced tuition, unless a state has enacted a law affirmatively providing for such eligibility. There is no loophole.

The RIBGHE intends for this policy change to take effect at the start of the Fall 2012 semester. This new policy will apply to all public universities, colleges and community colleges in Rhode Island.

In-state tuition and other taxpayer-subsidized perks for illegal aliens are not only unlawful, they also make matters worse by inducing greater numbers of illegal aliens to cross the border in search of sanctuary and U.S. taxpayer subsidies.

If rule of law means anything, not one single taxpayer dollar should be used to pay for the higher education of illegal aliens. Quite simply, for public officials in Rhode Island (or anywhere else) to flout illegal immigration laws is a fundamental abuse of power.

And on that point, please again consider signing our new petition to urge our nation’s governors to enforce immigration laws. They must not follow the corrupt example set by Barack Obama and his administration. The rule of law must be our guiding principle.

Until next week…

Tom Fitton
President