For the first time in its history, the Federal Reserve created $2 trillion of assets and debts during the past year so it could rescue banks from the unparalleled leverage that brought the world’s biggest economy to a collapse unlike anything since the Great Depression.

Taxpayers, to whom the Fed is beholden, have no idea how their money was used to save banks from their own recklessness. As the money is theirs, these involuntary investors have a right to know who received the loans, in what amounts, for which collateral and why the loans were conceived.

The Fed says U.S. citizens don't have the right to know these things and resisted requests for an accounting under the Freedom of Information Act filed by Bloomberg News through its parent, Bloomberg LP. When the Fed went to court to prevent disclosure, the judge ruled that the central bank is obligated to release records of its lending on behalf of the taxpayer. The Fed now is considering an appeal.

“Openness will strengthen our democracy and promote efficiency and effectiveness in government,” Barack Obama wrote in a letter to all agency and department heads on his second day as president. “Transparency promotes accountability” because “information maintained by the federal government is a national asset,’’ he said. “My administration is committed to creating an unprecedented level of openness in government.''

The Fed says it can’t give up the documents without stigmatizing banks and frightening customers into yanking their deposits. There is no evidence to support such an assertion. Recent events show that the opposite is true. When Citigroup Inc. in November received a government rescue package that shields the bank from losses on toxic debt and injected $20 billion of capital, Citigroup shares climbed as much as 64 percent in New York trading. About the same time, E*Trade Financial Corp., the No. 4 online brokerage by client assets, surged as much as 42 percent, the most in 12 years, after saying it was ``optimistic’’ about receiving taxpayer funds under the government’s Troubled Asset Relief Program.

Since its creation in 1913, the Fed has been the watchdog over our money. Instead of informing us as it should, the Fed is running interference for the banks that borrowed our money and insists to a federal judge that the public shouldn’t worry about what the Fed does with our billions of dollars. The Fed is saying we can’t handle the truth.

The law doesn’t allow the government to get away with secrecy based on a mere claim that some sort of damage would result. Trust in the official line isn’t enough. This we learned during the Watergate scandal, which prompted sunshine laws.

For the Fed’s claim to secrecy to win, it must “provide evidence that if the requested information is disclosed, competitive harm would be ‘imminent,’” Chief U.S. District Judge Loretta A. Preska wrote in Manhattan last month.

The harm shown must stem from competing banks using the information against the borrower. The Fed has to show that non-TARP banks would market themselves based on the fact that others went running to the government trough for sustenance.

That isn’t an easy test, and it shouldn’t be. Hundreds of billions of public dollars poured into institutions without any serious accountability. Fed officials didn’t come close to meeting the test. All they offered were sworn statements from employees speculating that borrowers might be labeled as losers. They said nothing about how competitors might use the information against the borrowing banks, Judge Preska said.

This is basic information necessary to understanding the financial crisis and its aftermath. Judge Preska’s 47-page order leaves no doubt that the facts and the law require the Fed to turn over the documents. The central bank is balking while considering an appeal and delaying the day when it will have to reveal what it's hiding.

Any appeal would have to be mounted by Solicitor General Elena Kagan, who reports to the president through U.S. Attorney General Eric Holder. While the decision is theirs to make, the buck -- now propped up by taxpayers -- still stops at 1600 Pennsylvania Avenue.

This is an opportunity for President Obama to make good on his promise to create the most transparent government. By forgoing an appeal, he can show that he means what he says.

What he says is correct. Transparency promotes accountability. So far, there has been much too little of it when it comes to the use of our money to save the banks that failed their shareholders and creditors.


Matt Winkler is editor-in-chief of Bloomberg News.

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