Sunlight Foundation Reporting Group

Powerful financial council could deny or delay public information

A newly created powerful federal financial council will have broad latitude to deny or delay Freedom of Information Act (FOIA) requests if it adopts proposed rules, charges a financial watchdog group.

Under the Dodd-Frank financial reform law, the new Financial Stability Oversight Council (FSOC), is explicity made subject to the Freedom of Information Act. The Council, whose members are representatives of major financial agencies, has authority to collect wide-ranging information about financial institutions, such as internal company documents, in its mission to ensure the stability of the financial system. In late March, the Council published proposed rules on how the FSOC will implement FOIA; comments were due Friday.

“When the government undertakes massive, unprecedented, and costly actions as it did during the recent crisis and as it is doing now in implementing financial reform, government transparency and accountability is essential to maintain public faith in public officials and public institutions—that is also at stake," writes the watchdog group Better Markets in its comment letter.

Better Markets was founded in 2010 to monitor transparency in the global and capital markets; its CEO, Dennis Kelleher, formerly was a Democratic staffer on Capitol Hill, and its founder, Michael W. Masters, also is a managing member of the investment firm Masters Capital Management and has made campaign contributions to both Democrats and Republicans.

Better Markets argues that the proposed rules give the Council "a broad and unreviewable discretion to ignore or reject requests for documents purely on the basis of technical defects in the request"; that they give the Council "unacceptable authority" to delegate FOIA requests to other agencies; that they do not require the Council to give information about the volume of withheld documents; and that they "cast doubt" on the Council's requirement to make its votes public.

While comment letters were due Friday on the proposed regulations, they have not drawn a lot of attention. Only nine comment letters are available at regulations.gov at the time of this posting.

Several other advocacy groups also urged the FSOC to strengthen the proposed rules. Americans for Financial Reform, a coalition that includes consumer and labor groups, voices many of the criticisms articulated by Better Markets. The groups Public Citizen and the Project on Government Oversight (POGO) also criticize the proposal in a joint comment letter. The groups argue that the requirements for a request to be deemed "complete" are too onerous and that the Council should expand the definition of circumstances in which expedited processing would be granted, among other criticisms. OMB Watch also warns that the technical requirements for a request are too burdensome and urges the agency to proactively post responses to FOIA requests online.

Also weighing in is the National Archives, which applauds the FSOC for proposing to make records available on a discretionary basis even when a FOIA exemption could apply, and quotes President Barack Obama's 2009 directive on FOIA, "[A]n agency should not withhold information simply because it may do so legally. I strongly encourange agencies to make discretionary disclosures of information."

Comments from industry were more scarce. A comment letter filed jointly by the American Insurance Association and the American Council of Life Insurers is concerned that the proposed regulations should be tightened to ensure that financial institutions' records are withheld from public persual. For example, the groups worry that language saying the council has discretionary authority to release records "is too broad" and does not take into account the "highly senstive nature" of the information. Instead, the Council's rule should focus on the "circumstances of the request" in deciding whether or not to apply an exemption to deny it.

The insurance groups also say that they want to ensure that the Council adopts a broad standard in deleting identifying details in records provided to the public; that it strongly supports the idea that it should delegate responsiblity for FOIAs to the agencies where the Council obtained such information; and that business information should not be disclosed except in narrow circumstances. A letter from Nationwide Mutual Insurance Company echoes many of the themes from the insurance trade groups. The Managed Funds Association also filed comments, but the text was not available at the time of this posting.

There is one point where insurance industry and watchdog groups agree: the proposal should be expanded so that FOIA requests would be permitted to be made via email, as opposed to just old-fashioned snail mail.