Why are the Fed and SEC keeping secrets?

Our government agencies continue to do everything in their considerable power to keep hidden information that belongs in the public realm.

By MSN Money Partner Apr 3, 2012 4:17PM

By William D. Cohan


Getting what should be public information about major Wall Street firms can be maddeningly difficult.


Bloomberg News discovered this in its ultimately successful effort to get information on the $1.2 trillion in "secret loans" the Fed doled out during the financial crisis. And I've had no small experience of it myself.


As I started each of my three books -- about Lazard Freres, Bear Stearns and Goldman Sachs -- I submitted Freedom of Information Act requests to the appropriate government agencies (the Securities Exchange Commission, the State Department and the Federal Reserve) to obtain whatever documents, memos and e-mails they had about these companies and their senior executives.


I was hoping to find, among other nuggets, details of enforcement actions, or settlements that were reached where the firms "neither admitted nor denied" guilt, or other documentary evidence of the coziness that has for too long existed between Wall Street and Washington.


Sadly, getting this information in anything like a timely basis -- say, before my books were finished and published -- has been nearly impossible. At first, when I asked the SEC about documents related to Lazard's role in the Hartford-Mediobanca scandal starting in 1968 and ending in 1981, the agency told me it could not release the information. When I reminded the FOIA administrator that the SEC had already released the information, years before, to another journalist, the agency dug up the 40 boxes of unindexed, unorganized documents and invited me to a warehouse in Pennsylvania to take a look. After an hour or so, the clerk asked me if I was done with my review. (Eventually, I persuaded the SEC to ship the boxes -- at my expense -- to its office in Manhattan, where I spent months poring over them.)


Zilch, Nada


But that bit of beginner's luck turned out to be a fluke. To this day, the SEC has given me nothing -- zilch, nada -- about Bear Stearns or Goldman Sachs. After the Lazard book was published, the State Department sent me a thin file that was, supposedly, what it had in its possession about Felix Rohatyn's three years as the U.S. ambassador to France. I opened the envelope and discovered that most of the 10 or so pages had been redacted.


Last December, nearly nine months after my Goldman book was published, I received an official-looking package from the Board of Governors of the Federal Reserve System. Slapped on the outside of the envelope was a bright orange sticker about keeping the contents -- a computer disk -- away from "magnets and electric motors" and, of course, the warning "Do Not X- Ray." This, I suspected, was my long-awaited document file about Goldman's dealings with the Federal Reserve in the days leading up to Sept. 22, 2008, when it, along with Morgan Stanley, had the good fortune to be allowed to become a bank holding company with lifesaving unlimited access to short-term funding.


I was hoping to discover how that whole thing went down at the time, and how Goldman and Morgan Stanley got the Fed's blessing but Lehman Brothers Holdings Inc. did not. Also I was interested in Goldman's interactions with the Fed since that fateful moment. My hopes were raised further when I heard from people at the firm that Goldman had reviewed the contents of what was being sent to me and that its executives seemed worried about it.


Nothing New


No such luck. On the disk was nothing more than a bunch of obscure -- but publicly available -- Federal Reserve documents about the details of Goldman's assets and liabilities on a quarterly and annual basis, everything from the kinds of loans the firm had been making to the tenor of its derivatives book to whether the real-estate loans it owns were backed by commercial properties or residential properties.


The documents contained a bunch of detailed numbers (without explanation) about the kinds of risks Goldman was taking at a moment in time, thus prying open ever so slightly the firm's black box.


For instance, who knew that at the end of December 2011 Goldman had $44.2 trillion in the notional amount of derivatives contracts on its books, about $1.3 trillion more than it did in 2010? Or that $36 trillion of that amount was for contracts of less than one year in tenor? Or that Goldman had $19 billion in insurance underwriting assets, up nearly 40 percent from the year before? Or that Goldman's book of commercial and industrial loans was $7 billion at the end of 2011, up dramatically from the $829 million it held at the end of 2010? Or that the firm's stash of mortgage-backed securities -- now $1.37 billion -- had nearly doubled what it had at the end of 2010?


Although I still have no idea how Goldman makes its money, I guess it is interesting to know that the government produces mind-numbing documents containing columns of numbers and then puts them on websites buried on the Internet.


But let's not pretend that the Fed's carefully scripted, and untimely, release of a disk of public information to me is even remotely the way FOIA is supposed to work. Where are the documents and e-mails about how Goldman was allowed by the Fed to become a bank holding company? Where are the documents from the SEC about Goldman? Where, for that matter, are the SEC documents related to the short-dated, out-of-the-money puts that investors spent millions of dollars buying in the last week of Bear Stearns's existence? The SEC said it was investigating who bought and sold these puts, but it has never made the results of its investigation public despite my FOIA request.


If our government agencies continue to do everything in their considerable power to keep hidden information that belongs in the public realm, all the regulatory reform in the world won't end the rot on Wall Street.


William D. Cohan, a former investment banker and the author of "Money and Power: How Goldman Sachs Came to Rule the World," is a Bloomberg View columnist. The opinions expressed are his own.


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Apr 3, 2012 5:41PM
Yes, very disturbing the lack of transparency, but what would you expect? No matter what anyone tells you, the most powerful people in our country are the private bankers running the Fed, SEC, Treasury, CFOC, politicians, etc.... When a new Treasury Secretary is appointed, who is it typically? A Goldman Sachs, BOA, etc... high roller who keeps the republicans screaming for more deregulation. I'm a republican, but hate to admit it and agree with much tighter regulation. The party of Lincoln is no more...Lincoln refused to take loans from the bankers and printed his own greenbacks. A government that can issue debt can issue its own money and stay out of debt, it's really that simple. Good luck on your search for the truth - Congress can't even make the Fed more transparent, so how would an author fair? We all know that loan delinquencies hit bank reserves, but tack on these derivatives and insurance on said derivatives with none of the contract parties able to pay, and you have the 2007-2009 crash. Come on, what do you think QE is all about? It certainly isn't there to help the citizens.... What a scam.
Apr 3, 2012 6:53PM
Why as Americans are we tolerating this?? Why have we become so polarized that we've taken our collective eye off the ball, i.e. the government? Political beliefs aside, I would think that we could come together as a country and demand accountability from our elected officials! If not - and we let our governement run roughshod over us as they've been doing - then we're no better than some Third World country with a corrupt leader.
Apr 3, 2012 5:58PM
   The bulk of the financial federal oversight officials are former officers at many of these companies, do you really expect them to implicate their buddies or provide information freely that might even implicate themselves?
Apr 4, 2012 4:06AM
The banksters bought our Government with fiat cheap money; banksters bought every single congressman & woman,... In The Federal Reserve banking Cartel we Trust!...The SEC has been bought and paid for by the banks that is why no one in 2008 and in the MF Global theft has gone to jail.
Apr 4, 2012 8:36AM
This like every problem in America, can be solved by its people....  If you want to shut down the banks.... easy... .cause a run on them... ,. if everyone pulled their savings out one bank which would leave them without money to lend and invest.... they would have to close.. Just like gas...If you want lower gas prices... don't by one kind as a country..... exxon .. shell it don't matter.... when they don't move product... watch if fall... we control this country... just not they way we used too.... if you want a change.... use the internet... ads.. etc.... get the word out......if we all work together we can make it a better place... oh yea..... vote and vote in new people to run this country the ones we have now are to busy with their own agendas to worry about us....
Apr 4, 2012 7:18AM

The Federal Reserve is not Federal and there are no reserves. The Federal Reserves Banks are not even Banks. The Majority of American People have no idea what the Federal Reserve does and how they control the entire Financial System. The Hidden Cost of the Federal Reserve System actions - QE1, QE2 and Stimulus -  Inflation , inflation, inflation. Printing money around the clock has caused the American Public to pay taxes daily - inflation.

Check out the price of OIL, GASOLINE AND FOOD.

Apr 3, 2012 8:19PM
Any government that grows into as much of a behemoth as the U.S. is VERY DANGEROUS. Don't think for a minute that the road to serfdom upon which we are travelling is any different than the trails blazed by other countries excessively large governments, or that we are any different as a people than those that lived in countries that became totalitarian. We will give up our birthright as free people to give the power to the government to rob our neighbors and spread the wealth, to give us healthcare, welfare, snap benefits or whatever tidbit they might hand out next week. For these goodies they will ask your complete obedience. So crouch down and lick the hand that feeds you.  
Apr 4, 2012 9:49AM
How much more BS will we be fed before they see a revolution
Apr 4, 2012 8:07AM
Read the book called "The Creature from Jeckyl Island", it is an eye opener. It is true that the Fed is NOT Federal and has NO Reserves, and is NOT a Bank, it is a privately owed money cartel in control of the worlds financial system. They answer to no one and control the US and Global money system. Read it, you can't put it down, I was amazed but now I understand a lot more of how this "creature" lives and grows, and it answers all of William Cohan's questions.
Apr 4, 2012 1:54AM
The "government" is not our friend - despite it supposedly being us. Banksters are no more than mobsters with a license to steal, much like mobsters from Vegas with a license to gamble. They moved from the Strip to the Street a few years back. Remember, it's that same government which granted BOTH the license to gamble AND the license to steal. Without poor there would be no rich and without debt paper money would have no value. Someone has to tell them there's already too much debt.
Apr 3, 2012 7:56PM
The FOIA is a panacea for those who are gullible enough to accept it.  It certainly doesn't function like most think it should.
Apr 3, 2012 10:22PM
You simply do not understand governmenteese. They don't care what you want and care even less about some idiot law  that is unenforceable and there isn't a government clerk alive or dead that will lift a finger for you or anyone else. That's the way it is. Even "Congressional inquiries" were routinely shelved until they wrote a few times then we slap some documents together and mailed them, often useless gibberish.
Apr 4, 2012 10:06AM
Since 2008, we have the most corrupt federal government in our history, one that is constantly placing threats against the MSM and anyone trying to maintain freedom and truth.
Apr 3, 2012 6:23PM
Apr 4, 2012 7:30AM
Cohan should address congress on the illegal withholding of information
Apr 3, 2012 8:25PM
Truth = the wind that would blow down the house of cards.
Apr 4, 2012 9:42AM
You don't have to read it when you can smell it.
Apr 4, 2012 11:07AM

America is on its way to socialism and then something far worse.


Genie is out of the bottle...

Apr 4, 2012 6:39AM
If they wont show it it's ilegal. Thats why!!
Doesnt God tell the reader of the Bible that among the 7 deadly sins he despises is GREED!!! Those who continue to screw of the little guy for profits have an afterlife of Hell with Satan to look forward to. Enjoy the HEAT boys!!!
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