Why Is the Obama Administration Trying to Keep 11,000 Documents Sealed?
Not Fannie and Freddie. The much-loathed mortgage giants were kept in a perpetual coma, neither fully alive nor dead, and forcibly converted into a highly lucrative, and highly irregular, revenue source for the federal government.
All of this behavior prompted a series of lawsuits. Shareholders in Fannie and Freddie were naturally more than a little pissed at having the government permanently forestall any chance they might have at ever having their investments in the company pay off.
In the discovery battle in these suits, the government’s pleas for secrecy were so extreme that it asked for, and received, “attorneys’ eyes only” status for the documents in question. This meant that not even the plaintiffs were entitled to see the raw papers. This designation is usually reserved for cases involving national security or proprietary business secrets.
But there were no nuclear codes or plans for next-generation cell phone technology here. Instead, it was just a very strange history of government officials expropriating a monster pile of cash from a pair of political-albatross mortgage companies.
Why the extreme secrecy? The seven documents unsealed by Judge Sweeney last week offer only a hint of a reason. The materials are definitely embarrassing. Among other things, they demonstrate that not only did the government know the GSEs weren’t in a “death spiral,” it was actually quite confident in their future profitability well before it changed the bailout terms. Then and now, government officials lied about what they were doing, and why.
But there might be more to this story. Likely also buried in the still-sealed documents is a wealth of information about the government’s plans for future reorganization of Fannie and Freddie, a huge looming event in the history of American finance.
Many of the government officials who were involved in the decisions surrounding the GSE conservatorship are now in the private sector, working on proposals for much-anticipated GSE reform.
Without getting too deeply into the weeds of this even more complicated tale, government officials have been working with Wall Street lobbyists for years on a plan to have a consortium of private banking interests step into the shoes of Fannie and Freddie.
If this concept actually goes through, it would be the unlikeliest of coups for Wall Street. Having nearly triggered a global depression eight years ago, the usual-suspect, too-big-to-fail banks would essentially be put in control of the same housing markets they all but wrecked last time around.
This would be a nonstarter politically, the ultimate public-relations disaster, were it not for the fact that Fannie and Freddie are about the only companies on earth less popular than the Wall Street banks. Still, replacing the one with the other would be madness by any objective standard.
Are the gory details of that plan what the government is working so hard to keep under seal?
We may never know. Judge Sweeney has yet to rule on the vast majority of the documents, and there’s no guarantee that she will ultimately unseal the remainder of the material. We may never find out what the government was so keen on keeping secret.
The only thing that is clear is that there’s something odd going on, with the Obama administration asserting privilege over a volume of papers so large, it would make Nixon blush.
“I’ve been doing this for 20 years, and I’ve never seen anything like it,” says David Thompson of Cooper and Kirk, one of the attorneys fighting to unseal the material.
This is exactly the sort of story that tends to fly under the radar in the American media. It’s complicated and full of numbers and faceless officials and executives. There is little hope that even the most salacious series of Treasury documents can out-duel Donald Trump or the Bern-Hillary showdown for airtime. But whatever this is, it matters and we’d better keep an eye on it.
*Update: Ironically, one of the very first memoranda Barack Obama wrote as president was about the Freedom of Information Act, and contained language very similar to Judge Sweeney’s. “The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears.” (Hat-tip to analyst Josh Rosner for pointing this out.)