Meanwhile, Pittman still had not received any formal response from the Fed. “We got answers back which were kinda like, ‘We have your request. We're thinking about it,’” Pittman said in 2009. “And then, the next thing would be, ‘We have your request and we found, you know, 500 documents that apply to it.’ And then, the next thing that would come was like, ‘But you can't have any of ‘em.’” ^[23]

In early November, Investigations Executive Editor Amanda Bennett asked Pittman for an update on the FOIA. Told that the Fed remained silent, Bennett pulled aside an in-house lawyer, Charles Glasser, and asked how Bloomberg should proceed. Glasser suggested a legal suit, to force the Fed to respond and release the information. “I said ‘let’s do that,’” recalls Bennett. “I grabbed Mark and Charles, and we barged into [Editor-in-chief] Matt Winkler’s office and I said, ‘Matt, we’re going to sue the Fed,’ and Matt goes ‘Yes!’” ^[24] Winkler informed Bloomberg President Daniel L. Doctoroff and Chairman Peter T. Grauer of the decision; the company retained the outside law firm of Willkie Farr & Gallagher. ^[25] Bennett felt good about the decision. She says:

It’s kind of cool, this is what we do—we break open data, and if people are trying to keep information from us, we’ll try to get it through whatever means. It’s in the DNA of journalists in general and Bloomberg in particular. We want to find out stuff that is useful to people, and knowing [which banks] got what was an important thing to know.

On November 7, 2008, Bloomberg L.P. filed a “complaint for declaratory and injunctive relief” against the Board of Governors of the Federal Reserve System, in the US District Court for the Southern District of New York. The court document stated in part:

The government documents that Bloomberg seeks are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression. The effect of that crisis on the American public has been and will continue to be devastating… In response to the crisis, the Fed has vastly expanded its lending programs to private financial institutions. To obtain access to this public money and to safeguard taxpayers’ interests, borrowers are required to post collateral… 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. To discharge its obligation as the eyes and ears of the public, Bloomberg sought access to this information under FOIA. To date, the Fed has failed to produce the requested documents, or even formally to respond to Bloomberg’s request. ^[26]

The lawsuit also noted that during the week ending August 8, 2007, before the Fed added the new lending facilities for banks, the Fed’s average lending through the discount window was about $1 million. By October 2008, the Fed’s outstanding loans on any given day had reached an average $400 billion.

In March 2009, one Fed spokesman gave an explanation of why it could not make public information on specific loans. Christopher R. Burke, vice president of the New York Fed’s markets group, said that if the borrowing became public, that “could lead market participants to inaccurately speculate that the primary dealer was having difficulty finding term funding against its collateral in the open market and that the dealer itself must therefore be in financial trouble.” ^[27] It was the stigma argument.

As it awaited a court ruling, Bloomberg News published a series of stories about the lawsuit, and other news organizations, including Fox News and the Associated Press, either filed their own suits or filed briefs supporting Bloomberg L.P. ^[28] Pittman thought they would win the lawsuit, but Ivry was surprised when, in August 2009, Manhattan Chief US District Judge Loretta Preskaruled in favor of Bloomberg . “Pittman had always been more optimistic than me. You know, he’s from Kansas, he was a ranch hand, and he played football,” says Ivry. “I never thought that this would win. I mean, you have the Federal Reserve, and they could just go like that (I just flicked dandruff off my shoulder). We were dandruff to them. They’re the Federal Reserve.”

But the Bloomberg team knew a celebration would be premature. In September 2009, the Fed appealed the judge’s decision, and was joined in that appeal by the Clearing House Association, an organization of the 10 largest banks in the US, including Bank of America, Citibank, Wells Fargo and JPMorgan Chase. Pittman did not live to see the outcome of the appeal, as he died in November 2009 from a heart-related illness. Ivry took up the fight after Pittman, continuing to write articles about the case, and the crisis. “Pittman and I were best friends,” says Ivry. “He and I worked on everything together. He just happened to be, in my opinion, the best financial journalist in the country. And I was lucky to have him as a teacher.”

There were signs that Bloomberg L.P. might prevail. In February 2010, Chair Bernanke said the Fedwould support legislation to identify companies that used the Fed’sspecial lending facilities. Then a month later, the Second Circuit Court of Appeals ruled in Bloomberg’s favor. The Fed conceded the issue, but the Clearing House Association appealed on its own account and, in October 2010, asked the Supreme Court to hear the case. Ivry says:

We won on appeal. We won on an appeal of an appeal. And then it goes to the Supreme Court... But something interesting happened just before it went to the Supreme Court, and that was the Fed decided not to pursue it… Clearing House was the party in the suit. It was Bloomberg, L.P. versus the Board of Governors of the Federal Reserve, but the Federal Reserve was no longer part of the suit. It was the biggest banks that said, we don’t want you to know how much money we borrowed.

Dodd-Frank. Meanwhile, as the crisis continued to play out, the Obama administration in June 2009 had proposeda “sweeping overhaul of the United States financial regulatory system” to ensure that the country never again courted a financial meltdown. After intensive lobbying and negotiation, President Obama in July 2010 signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, named for Senator Chris Dodd (D-CT) and Congressman Barney Frank (D-MA), chair of the House Financial Services Committee. ^[29] It included a Financial Stability Oversight Council, designed to identify and address systemic risk, and a supporting Office of Financial Research to keep tabs on how markets were doing and to give an early warning signal if it saw trouble ahead. ^[30]

The Dodd-Frank Act obliged the Fed to make public information about loans made through its emergency lending facilities. But Bernanke argued that information on the special lending facilities should be released only “after an appropriate delay” to discourage stigma. What’s more, Dodd-Frank did not include discount window borrowings. That was because, technically, the discount window—in existence since 1913—was not an emergency lending program. Dodd-Frank did stipulate that the Fed release information about discount window lending after a two-year lag.