Bloomberg News was well positioned to take on an institution as powerful as the Federal Reserve. It had started in 1990 with a team of six people, and by 2011 employed over 2,300 in 146 bureaus around the world. Michael Bloomberg created the news organization to provide context to data provided by “The Bloomberg,” a terminal that he developed in 1982 to provide investors with real-time financial market data. As of 2011, virtually every leading bank, brokerage firm, insurance company, financial regulator and corporation subscribed to The Bloomberg. ^[3]

Bloomberg hired as his first, and as of 2011 only, editor-in-chief Wall Street Journal reporter Matthew Winkler. ^[4] By 2011, Bloomberg News was publishing more than 5,000 original stories on an average day, syndicated to over 450 newspapers worldwide. Bloomberg News had twice been a finalist for a Pulitzer Prize and had received over 500 awards, including the Roy W. Howard for Public Service, George Polk, Gerald Loeb, Overseas Press Club, and Sidney Hillman. ^[5] Of potential conflicts of interest, Michael Bloomberg said:

You grit your teeth and you go with the news side. The editorial independence of a news organization is sacrosanct. The fact of the matter is, the customers are going to deal with you regardless. If they pull away, they’ll go to our competitors, who are also in the news business, and the same thing will happen there, and they’ll come back to us. ^[6]

The Fed . The Federal Reserve System was the central bank of the United States. Congress created it in December 1913 to stabilize the nation’s financial system after a number of panics. The Fed’s major responsibility was to set monetary policy in order to maintain high employment, stable prices and moderate long-term interest rates. It helped operate the nation’s payment system, set rules for banks, and supervised their operations.

Since the Fed’s creation, it had used a tool called the discount window to lend reserve funds to banks during times of financial stress. These were typically short-term loans—usually overnight—and had to be secured by collateral with a value at least equal to the amount of the loan. Banks could borrow money at a discounted rate to ensure that they could nightly meet the reserve requirement—the amount of money the Fed required banks to have on hand to conduct business. Says the Fed:

The Discount Window functions as a safety valve in relieving pressures in reserve markets; extensions of credit can help relieve liquidity strains in a depository institution and in the banking system as a whole. The Window also helps ensure the basic stability of the payment system more generally by supplying liquidity during times of systemic stress. ^[7]

Banks used the window when necessary, but tried to keep it quiet, mindful that it was a lender of last resort; using it could signal to shareholders, depositors and financial markets that the borrower was experiencing difficulties.