When it comes to the SEC, at least, the Freedom of Information Act is no longer is the law. This was passed just in time to shield Fannie Mae and Freddie Mac from the public indignation when they go broke again, which they will. For years they have been used as slush funds and interim patronage employers for Democrats who are temporarily out of government service. Now that the bill is about to come due the second time this lucky bill has been passed to shield them from oversight.
Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.
The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from “surveillance, risk assessments, or other regulatory and oversight activities.” Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.
That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings.”
The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network. Steven Mintz, founding partner of law firm Mintz & Gold LLC in New York, lamented what he described as “the backroom deal that was cut between Congress and the SEC to keep the SEC’s failures secret. The only losers here are the American public.”
FOX Business Network sued the SEC in March 2009 over its failure to produce documents related to its failed investigations into alleged investment frauds being perpetrated by Madoff and R. Allen Stanford. Following the Madoff and Stanford arrests it, was revealed that the SEC conducted investigations into both men prior to their arrests but failed to uncover their alleged frauds.
FOX Business made its initial request to the SEC in February 2009 seeking any information related to the agency’s response to complaints, tips and inquiries or any potential violations of the securities law or wrongdoing by Stanford.
FOX Business has also filed lawsuits against the Treasury Department and Federal Reserve over their failure to respond to FOIA requests regarding use of the bailout funds and the Fed’s extended loan facilities. In February, the Federal Court in New York sided with FOX Business and ordered the Treasury to comply with its requests.
Last year, the network won a legal victory to force the release of documents related to New York University’s lawsuit against Madoff feeder Ezra Merkin.