Fox joins battle cry for details of US bail-out
IN AN aggressive and unprecedented confrontation with the Bush Administration, Fox TV has joined Bloomberg News in demanding it reveal details of who is receiving billions in US bail-out funding.
In an action almost identical to Bloomberg's freedom of information requests concerning Federal Reserve bail-outs, Fox Business Network has filed a lawsuit against the US Treasury Department over its failure to provide information on the bail-out funds or respond to FBN's requests filed under the FOI Act.
At the weekend, Bloomberg revealed the US Federal Reserve had also purchased $US308.5 billion ($A453 billion) in commercial paper and lent $US631.8 billion under eight apparently new credit programs.
But Bloomberg revealed these huge infusions of funds would be appraised by Moody's Investors Service, Standard & Poor's and Fitch, prompting widespread criticism.
These companies have been criticised for their failure to detect credit problems to date, issuing top credit ratings to $US3.2 trillion in subprime mortgage-backed securities that are at the heart of the financial crisis.
Bloomberg reports Keith Allman, from Enstruct Corp, a company that trains investors in financial modelling and asset valuation, as saying: "It is foolhardy to rely on the three New York-based companies."
A more devastating comment could not be made.
"They're outsourcing the credit assessment to a group of people whose recent performance has been unbelievably bad," said Allman, the author of three books on structured finance and a former vice-president of Citigroup's securitised markets unit.
"If their goal is to not take a loss on these assets, they should be hiring independent analysts."
This was just one of many attacks cited by Bloomberg concerning the financial arrangements.
The Treasury Department appears to be in a particularly difficult position as Fox has a good chance of gaining access to highly guarded information. Fox is demanding details of the Troubled Assets Relief Program spending of hundreds of billions by the Treasury Department, while Bloomberg is seeking details of the New York Federal Reserve's bail-out that amounts to trillions.
Either way, Fox joining the fray places the two key US financial arms under enormous pressure to come clean and tell US taxpayers where the vast, secret slush fund that is bailing out US financial and non-financial companies is going.
On Friday, Fox posted on its website that: "Fox Business Network has filed a lawsuit against the United States Treasury Department over failure to provide information on the bail-out funds."
Kevin Magee, the executive vice-president of Fox News, said: "The Treasury has repeatedly ignored our requests for information on how the Government is allocating money to these troubled institutions.
"In a critical time like this, amidst mounting corruptions and an economic crisis, we as a news organisation feel it's more important than ever to hold the Government accountable."
Steven Mintz, of Mintz & Gold LLP, who is a legal counsel for the network, said: "Despite the several requests for expedited information … it has become apparent that the Treasury will not co-operate without mounting legal pressure.
"Therefore, we have filed a complaint in the Federal Court in New York."
On November 25, the Fox Business Network filed, seeking data on the use of the bail-out funds for American International Group and the Bank of New York Mellon.
A request on December 1 sought data on the bail-out funds for Citigroup. FBN is asking for the Treasury Department to identify, among other issues, the troubled assets purchased, any collateral extended and any restrictions placed on these financial institutions for their participation in this program.
Fox, unlike Bloomberg, tends to approach issues with guns blazing. And it is beamed to millions of US households, often of the ultra-conservative persuasion.
President-elect Barack Obama may be pleased to see Fox taking issue with the all-powerful Treasury Department before he takes office, for any scandals uncovered will be laid at the feet of the Bush team.
As this issue will dominate political and economic discussion next year, regardless of whether the bail-outs are curtailed by the Obama administration, Fox will be at the forefront of defending angry taxpayers from an administration already in its death throes.
The Fed has so far managed to rebuff Bloomberg's FOI request for details of the multitrillion-dollar bail-out, claiming confidentiality, but politically it will be extremely difficult for Treasury to keep saying no.
And if Fox breaches the Treasury firewall and sheds light on the bail-outs, the Fed will be under pressure to tell the public where it is directing funds.
As Naked Capitalism's Yves Smith explains on his website: "Unlike the Bloomberg effort to compel the Fed to disclose information about the various Fed lending programs (exactly what collateral the central bank is taking and from whom), Fox could well win the fight.
"The Fed has contended that FOIA does not apply because the loans come out of the New York Fed, which is not a Government body."
That screen cannot apply to Treasury, which most definitely is.