Yesterday Senator Elizabeth Warren (D-MA), member of the Senate Committee on Banking, Housing and Urban Affairs,  and Rep. Elijah E. Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform, sent a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency (OCC) Thomas Curry challenging their decision to stiff Congress by not providing requested documents relating to violations of federal and state laws by mortgage servicing companies. 

Welcome to our world, where agencies routinely deny FOIA requests based on similarly outrageous exemption claims.

In this case, the Federal Reserve and the OCC are refusing to produce documents from their investigations of specific mortgage servicers for illegal foreclosures, inflated fees, or fraudulent court documents.  According to the agencies, these documents contain “trade secrets” that must be withheld from Congress to preserve their exempt status under the FOIA.  To the contrary, as the letter by Sen. Warren and Rep. Cummings points out, “Breaking the law is not a corporate trade secret.” 

While the agencies’ response is outrageous in its own right, it highlights once again how out of step agencies are with the president’s commitment to a more transparent and accountable government.  Both Congress and the public clearly have compelling and legitimate interests in the details of the government’s finding that the statutory violations committed by 14 mortgage servicers had “widespread consequences for the national housing market and borrowers.”  What could possibly be privileged about the specific violations specific banks were found to have committed?  The answer, clearly, is nothing. 

Sen. Warren and Rep. Cummings originally requested the documents “so that sufficient transparency exists when it can have the most impact on building public confidence.”  That confidence has been badly eroded “by a widespread concern that large financial institutions are not held fully to account when they break the rules.”  The information the members sought would go a long way toward restoring some of that confidence.  This is the precise kind of openness in government to which President Obama committed his administration when he announced on the first day of his first term “[a] democracy requires accountability, and accountability requires transparency.”

The response of the OCC and the Federal Reserve is wrong on so many levels.  As a legal matter, there is no merit to the position the requested information is a trade secret.  As a policy matter, there is no merit to preventing Congress from performing its legitimate oversight role.  And as a matter of plain common sense, it is nothing short of ridiculous to withhold information that would help restore public confidence in the housing market, which is such a critical element of any national recovery plan.  We can only hope that reason prevails, but so far the signs are not promising.