Wednesday, May 20, 2015

Times journalist hits White House for growing secrecy in Fannie Mae case

Times journalist hits White House for growing secrecy in Fannie Mae case

More recently, I’ve seen another example of the government trying to cloak its actions. The extreme secrecy began with a lawsuit filed against the government by shareholders of Fannie Mae and Freddie Mac, the mortgage finance giants that are wards of the state. These shareholders sued after the government changed the terms of those companies’ bailouts in 2012 and began funneling all of their profits into the Treasury’s general fund. The plaintiffs contended that siphoning off those profits was an illegal taking of private property by the government.

In response to the lawsuit, the government has demanded an extreme level of secrecy surrounding documents the judge has ordered it to produce. Those documents would shed light on how the decision to divert the profits was made, an important question given that the 2008 law written by Congress to handle the company’s problems was supposed to stabilize them and let them build up capital after the crisis receded.

And yes, the crisis has receded. As of the most recent quarter, Fannie and Freddie have returned to the government $40 billion more than they drew from taxpayers. And the money spigot continues to spout. But the companies have not been able to build up the capital they need to forestall another rescue.

The shareholder case is still in its early stages. But the government’s desire to keep a tight lid on its documents is remarkable. Indeed, the Justice Department is even asserting presidential privilege to keep 45 of the documents permanently confidential. These materials — emails, draft memos and news releases — were created by officials at the Treasury Department and the Federal Housing Finance Agency, the overseer of Fannie and Freddie since they collapsed in 2008.

After I wrote about this unusual assertion of presidential privilege, the DOJ went further. It asked the judge to put under seal additional lists of documents that the government will withhold because of various privilege claims. In short, the DOJ is asking that its privilege assertions be privileged.

I’m not a court reporter, but this is a first for me. And the lawyers who are litigating the case for the Fannie and Freddie shareholders say they’ve never seen anything like it either.

For the government’s part, it has said that these documents, which date back as far as 2008, must be kept under wraps because they may roil the markets. That is completely absurd.

What it really looks like is the government thinks it has something to hide in this case. Whether the judge will allow it to keep these documents confidential remains to be seen. But this is certainly not how a government that was going to be the most transparent in history behaves.

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