After taxpayers bailed out the financial sector amid much public outcry last year, political and open-government observers are wondering how the Securities and Exchange Commission will now be allowed to skirt certain Freedom of Information Act (FOIA) requests under a new federal law.
Tucked inside a bill revamping the financial industry, signed by President Obama on July 21, is a provision that allows an exemption for the SEC to ignore certain FOIA requests. The FOIA dodge came to light when journalists from Fox Business Network discovered the SEC’s new public records loophole, an action the network’s attorney dubbed “a backroom deal that was cut between Congress and the SEC to keep the SEC’s failures secret.”
While big business defenders say the FOIA exemption appropriately protects certain disclosures for financial institutions, allowing the agency to work more effectively, others call it overbroad and another example of what they claim is the Obama Administration’s failed promise for renewed transparency in Washington.
“In general and across the board, it’s always a serious problem when the government tries to hide something,” says Mike Foley, a professor of journalism at the University of Florida and former executive editor of the St. Petersburg Times newspaper.
“The public pays the bills, elects the officials and they need to know. Especially with the SEC, the public is invested literally and figuratively and I think it’s just wrong,” Foley said of the new law. “These are not media records. These are public records and they are open to everyone. With money, you are dealing with power and a bureaucratic government and it’s got to be open—period. That’s what the FOIA is intended to do.”
SEC officials defended the provision, saying in a statement that it was not intended as a blanket exemption but rather a way to protect confidential business information and allow businesses to cooperate with them as it protects “highly sensitive and proprietary information such as customer-account information and trading algorithms”.
But Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, filed new legislation on Thursday designed to remove the SEC FOIA exemption and return the law governing disclosure back to “status quo.”
“If the SEC says there is no change, then they should not object to this bill,” Issa told Fox Business News.
He decried the agency’s track record on openness.
“I’m sorry, but they told us there was no problem with Bernie Madoff effectively for decades. It’s clear the SEC has problems,” Issa told Fox.
“Transparency is part of how you fix problems at agencies as you make them accountable to people who see problems before they recognize them… Here in Washington, it’s not Republicans against Democrats, House against Senate. It’s all of us against the bureaucracy,” he said. “We need to make very clear that the public is a part of our team in taking out the bureaucracy.”
Issa wasn’t the only critic of the loophole.
Henry Asbill, an attorney representing NBA owner Mark Cuban in an SEC lawsuit told the Wall Street Journal that the new bill was “very broad.”
“You could read that to apply to virtually anything the SEC is doing with respect to its regulatory responsibilities of financial institutions or banks that are covered by the bill,” he told the Journal.
Foley, the former newspaper executive, argues that the media doesn’t do enough to educate the public that FOIA laws are for them, rather than a function of investigative reporting. He adds that government seeking to insulate itself from scrutiny is nothing new, even as lawmakers tout a new openness.
“I fear that government is government and often it doesn’t matter who is in charge. When someone gets into office or into a bureaucratic job, they are trying to protect themselves, not make mistakes. But if they do, they don’t want to get caught,” he said. “That’s why you never hear government officials talk in an active voice—‘I made a mistake.’ It’s always ‘mistakes were made.’ The Obama Administration may be very well-intentioned but this doesn’t sound like an open-government idea.”