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Secrecy, Systemic Risk, and the Freedom of Information Act’s ‘Confidentiality’ Exemption

During the financial crisis, the Federal Reserve lent hundreds of billions of dollars to struggling banks and financial institutions. When journalists filed Freedom of Information Act (FOIA) requests seeking information about the loans, the Federal Reserve responded that the information was exempt from FOIA because it was commercial or financial, confidential, and obtained from private parties, thus satisfying the fourth FOIA exemption. Litigation of this question within the Second Circuit emphasized courts’ deep disagreement over the “confidentiality” exemption’s breadth. This paper argues that some courts’ broad interpretation of “confidentiality” is inappropriate given FOIA’s language, purpose, and legislative history. In justifying its decision to withhold the information, the Federal Reserve raised legitimate concerns about systemic risk at the height of the financial crisis – but the currently existing FOIA exemptions, properly construed, do not capture these concerns. Therefore, this paper argues that Congress should enact an additional “safety valve” exemption. The new exemption would allow courts to exempt particular information from disclosure in cases of extreme necessity, while not betraying legislative intent and principles of statutory interpretation by reading an existing exemption in an illogically broad manner.