The negotiations between Greece and its creditors has gone through so many small and large faceoffs that it can sometimes be difficult to keep track of all of the chapters of this saga. But the first and largest pitched battle was over whether Greece would accept an extension of a €172 billion rescue program which was due to expire at the end of February.
The new Greek government had originally said it would reject a €7.2 billion payment it would receive in connection with completing the current program, which included implementing so-called structural reforms like reducing pensions and “liberalizing” its labor markets that the incoming government had promised to reverse. Finance Minister Yanis Varoufakis had called for an overall restructuring of the creditors’ arrangements with Greece in light of the abject failure of the austerity program. He urged the adoption of pro-growth policies and restructuring debts so that the lenders would benefit if the Greek economy staged a real recovery.
However, Greece’s leaders capitulated to the creditors’ demands and signed a memorandum with the Eurogroup in late February agreeing to a four-month extension of the rescue program (now widely referred to as “the bailout”). The Greek government was required to submit a detailed list of structural reforms that needed to be reviewed and approved by the Troika and then the Eurogroup before the €7.2 billion would be disbursed.
The United States initially weighed in on the side of Greece. As the Wall Street Journal reported:
“You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits,” Mr. Obama said in an interview with CNN’s Fareed Zakaria aired Sunday.
He said Athens needs to restructure its economy to boost its competitiveness, “but it’s very hard to initiate those changes if people’s standards of livings are dropping by 25%. Over time, eventually the political system, the society can’t sustain it.”
The Administration later reversed itself, with Treasury Secretary Jack Lew calling Varoufakis to urge him to conclude a bailout deal with the creditors “to find a constructive path forward in partnership with Europe and the IMF to build on the foundation that exists to advance growth and reform.” Needless to say, the “foundation that exists,” meaning the then-current structural reform program, had clearly not produced anything dimly resembling growth. But the US had apparently decided to hew to the European party line that Greece’s disastrous experience resulted from the country not trying hard enough, so the beatings would continue until morale improved.
During this time, the Federal Reserve remained silent, in keeping with its supposedly independent, meaning apolitical, role. Yet given the central bank’s mandate to preserve stability, as well as personal relationships between some Federal Reserve board members and officials at the ECB, such as between Fed vice chairman Stanley Fischer and his former student, now ECB head Mario Draghi, it seemed inconceivable that Federal Reserve Board governors and staff had not discussed the Greek negotiations internally and with their counterparts at the ECB.
We sent this Freedom of Information Act (“FOIA”) request to the Federal Reserve Board of Governors as stipulated on its website:
The full text of all e-mails, faxes, and letters sent or received by any employee of the Board of Governors of the Federal Reserve System, including the Governors themselves, from January 1, 2015 through and including February 27, 2015, containing any of the following words/terms: Greece, Syriza, Tsipras, Varoufakis, Grexit, ELA.
Any memoranda, notes to file, or meeting notes prepared by any employee of the Board of Governors of the Federal Reserve System, including the Governors themselves, from January 1, 2015 through and including February 27, 2015, containing any of the following words/terms: Greece, Syriza, Tsipras, Varoufakis, Grexit, ELA.
A list of phone calls and meetings of any Board of Governors member or staff member from January 1, 2015 to present with any officers or employees of the following organizations; the IMF, the European Parliament, the European Commission and the European Central Bank with the name of the Board of Governors member, the name of the foreign official, the date, time and duration of the call/meeting, and any information about the substance of the conversation, including but not limited to phone calls and meetings with President of the European Central Bank Mario Draghi, President of the Eurogroup Jeroen Dijsselbloem, and President of Deutsche Bundesbank Jens Weidmann.
As you will see from the document embedded at the end of this post, we received an acknowledgement from Jeanne M. McLaughlin on March 2. Note that under the Freedom of Information Act, a Federal agency is required to make a response within 20 days. On March 30, Ms. McLaughlin sent an e-mail stating that the Fed would extent its period for their response till April 14, invoking a provision in the FOIA that allowed the recipient to have an additional ten days.
On April 24, we e-mailed Ms. McLaughlin stating that we did not seem to have received any response and requesting that she send us a response or resend one on the off chance that an e-mail had gone astray. We have yet to receive any reply.
It is sadly typical for bodies that are subject to FOIA to deny or ignore information requests even when the basis for not supplying the sought-after information is tenuous or non-existent. Stonewalling has become so common that the House Oversight Committee has taken interest in the problem. From a May 6 story in Politico:
The House Oversight Committee is reaching out to reporters, asking them to relay some of their Freedom of Information Act horror stories in preparation for a hearing next month on how to improve the FOIA process.
“Over the years I have heard from many of you that the FOIA process is broken,” House Oversight Committee spokesperson Melissa Subbotin Sillin wrote in an email to reporters. “Many requests go unaddressed, come back heavily redacted for no apparent reason, or are ignored altogether. Both majority and minority committee members are coming together to do a deep analysis to find where the problems exist and what fixes need to be made. In order to do so, we need your help.”…
Issues with the FOIA process are longstanding. On Wednesday, the Associated Press’ general counsel Karen Kaiser testified before the Senate Judiciary Committee in support of the FOIA Improvement Act, outlining how much more difficult the FOIA process has become.
“We are witnessing a breakdown in the system – both on the procedural front, in the form of continual delays and agency non-responsiveness, and on the substantive front, with the vast over-use of exemptions and redactions,” Kaiser said.
Based on our understanding of FOIA, it is hard to see how the Federal Reserve has a basis for not completing our request. We are not seeking confidential supervisory information. It also seems unlikely that internal or external counsel would have been involved in what would be political and economic discussions with the ECB regarding Greece, and therefore most and likely all of the material would not be subject to attorney-client privilege. Finally, the central bank has sought to deny some past FOIAs by claiming the information resides at member banks like the New York Fed, which are not subject to FOIA. Our request is clearly limited to communications and information at the Federal Reserve Board of Governors and hence should be subject to disclosure.
One of our Congressional contacts has forwarded our correspondence to the House Oversight Committee, so we hope they take an interest in our matter and press the Fed to complete outstanding FOIA requests, including ours. This page lists the members of the committee. If you are a voter in any of their districts, we would very much appreciate it if you could call or e-mail their office (contact information here). Tell them you applaud this effort. Judge Louis Brandeis said, “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants.” That spirit is the foundation of all freedom of information laws, and they are taking up an important fight to make sure that these rules retain their power as a key protection of the public interest. Please cite our FOIA as an example of the sort of non-compliance that you hope that they can remedy.