The august Federal Reserve is not given to slapstick humor, but sometimes it can’t resist. Dylan Ratigan, the spirited talker from MSNBC, and the Huffington Post joined forces to assault the traditional secrecy of the central bank. Months ago, they filed a freedom of information request, asking the Fed to make available the meeting minutes of Fed decision makers from 2007 to 2010. Those were the critical years of financial collapse and massive bailouts when the Fed dispensed trillions of dollars to comfort the panicky financial system and prop up insolvent banks.
At this late date, the request seems reasonable. After all, the banking crisis is long over—or so they say—and by now the public ought to be able to examine how and why the Fed governors decided to launch their extravagant rescue of Wall Street. Normally, the Fed keeps the records of these official deliberations secret for five years before releasing them. But the last five years were not normal. They remain the source of popular anger and political upheaval.
Months passed. Finally, a big package was delivered to the two media outlets—513 pages of verbatim discussions by the Federal Open Market Committee, the decision makers who set monetary policy and authorize the big-ticket loans and guarantees for troubled financial institutions. Imagine the high drama those pages would reveal.
“Good morning, everybody,” Chairman Ben Bernanke announced. The page went blank, actually gray. The only words that appeared were the names of the numerous participants, followed by page after page of empty gray space. At the bottom each page it said in bold type “Authorized for Public Release.” Then Bernanke spoke again. “So we’ve had a motion without objection. Okay, then the swap lines are approved. Let’s turn now to the economic situation.” Etc., etc. More empty gray pages—roughly 500 of them.
Do you get the Fed’s joke? This is how the central bank informs the public in a timely manner—by erasing all “substantive discussions and deliberations among the committee participants during these critical years.” It acts like the CIA for money. It invokes fine-print exceptions with no effort to justify the suppression. If you want to know more, wait around five years. By then the information should be quite harmless for the policy makers.
A few months ago, the Fed released the decision-making deliberations for 2006 and that record truly did produce a lot of laughs—bitter and sardonic laughter. The distinguished governors were indulging in happy talk and self-congratulations, utterly unaware of the catastrophe that was about to befall the financial system and the economy.
If those discussions had been made public six months or a year after the meetings, the citizenry would have rightly been infuriated.
The only reason the Fed governors insist on this arbitrary rule of secrecy is to protect themselves—to keep the public uniformed of their errors and false predictions. In the meantime, Chairman Bernanke takes pride in claiming greater transparency at the institution—also infuriating.
This issue is an essential reform for the central bank, and relatively easy to accomplish. First, I hope MSNBC and the Huffington Post will continue their valiant legal battle—appealing to a federal court where a judge can examine in private some of the material the Federal Reserve hopes to suppress. Recall that Bloomberg led a similar lawsuit that succeeded. A federal judge compelled the Fed to disclose in detail the vast financial wealth it dispensed during crisis. Recall that Congress, likewise, ignored the Fed’s strenuous objections and ordered the central bank to do revealing public audits.
This may have been traumatic for Federal Reserve governors and bureaucrats or the major banks on life support from Washington, but the republic somehow survived. Democracy lives on information or perishes when the powerful keep people in the dark. The Fed’s performance is sure to benefit from a little more sunlight.