Here are more excerpts from the Bloomberg suit with my emphasis. Note how basic the information is that Bloomberg is seeking:

In response to the crisis, the Fed has vastly expanded its lending programs to private financial institutions. To obtain access to the public money and to safeguard the taxpayers’ interests, borrowers are required to post collateral. Despite the manifest public interest in such matters, however, none of the programs themselves make reference to any public disclosure of the posted collateral or of the Fed’s methods of valuing it. Thus, while the taxpayers are the ultimate counterparty for the collateral, they have not been given any information regarding the kind of collateral received, how it was valued, or by whom.

Seems pretty clear to me.

Here are some of the documents Bloomberg is requesting. Emphasis is added, again, to show how basic this information is.

Records to sufficient to show the names of the Relevant Securities…

Records sufficient to show the amount of borrowing permitted as compared to the face value [the non-marked-down value of the collateral], also known as the ‘haircut…’

Records sufficient to describe whether valuations or ‘haircuts’ for the Relevant Securities changed over time [i.e. whether taxpayer losses are growing]…

Records sufficient to show the terms of the loans and the rates that the borrowers must pay…

Records, including contracts with outside entities, that show the employees or entities being used to price the relevant securities and to conduct” the lending process.

Who’s running the program? A simple question.

There are arguments against disclosure, of course, but the secrecy case here seems especially weak.

Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group.

“You have to balance the need for transparency with protecting the public interest,” Talbott said. “Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.”

Barney Frank gives it a try, and comes across sounding foolish. Here’s what he says about the loans the banks:

“I talk to [New York Fed Chairman Tim] Geithner and he was pretty sure that they’re OK,” said Frank, a Massachusetts Democrat. “If the risk is that the Fed takes a little bit of a haircut, well that’s regrettable.” Such losses would be acceptable, he said, if the program helps revive the economy.

Pretty sure they’re okay? And here’s the argument for secrecy:

Frank said the Fed shouldn’t reveal the assets it holds or how it values them because of “delicacy with respect to pricing.” He said such disclosure would “give people clues to what your pricing is and what they might be able to sell us and what your estimates are.” He wouldn’t say why he thought that information would be problematic.

Actually, it’s more likely that visibility would help the market, as Bloomberg’s story points out:

Revealing how the Fed values collateral could help thaw frozen credit markets, said Ron D’Vari, chief executive officer of NewOak Capital LLC in New York and the former head of structured finance at BlackRock Inc.

“I’d love to hear the methodology, how the Fed priced the assets,” D’Vari said. “That would unclog the market very quickly.”

The fear for banks is misplaced. They already have the loans, so they’re fine. The real purpose of secrecy is hiding how badly—not banks—but taxpayers are in the hole.

From the Bloomberg suit:

The public has significant and legitimate interest in the Fed’s conduct with respect for these four lending facilities because the Fed’s assets are public assets. Taxpayers are entitled to understand and assets the decisions by the Fed on the valuation of the collateral it accepts as security for public money being lent to private institutions. The public’s interest is particularly pronounced in light of the new expansive powers of the Fed, the new risks that the Fed is taking with public money, and the ongoing financial crisis and its effects on the American economy.

Dean Starkman writes and edits The Audit. He is CJR's Kingsford Capital Fellow.