Thursday, July 29, 2010

Financial Reform Bill And The SEC - What's The Deal With The Right's Hysteria?

A friend of mine posted on their Facebook page that the new financial reform bill would nullify the Freedom of Information Act.  Since I had heard nothing about this, I decided to do a little digging to see what I could find, and what I came up with was that Fox Business Network was denied an information request regarding Bernie Madoff from the Securities and Exchange Commission.

Here is what the relevent clause states:
(1) IN GENERAL- Except as provided in subsection (f), the Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities.
According to Fox's Dunstan Prial, "given that the SEC is a regulatory body, the provision covers almost every action by the agency," but from how this author interprets the section, it is this authors understanding that such exemptions only relate to information obtained by the SEC for investigative purposes - not every action the agency takes.  This does not mean that those within the agency would not abuse this clause given the opportunity, and it is this author's opinion that the law may be a little too broad.

According to Daniel Tenser for The Raw Story, Fox's assessment of the matter may be "something of an overstatement," stating that the public can still request information about the SEC's operations, although acknowledging that usually the SEC's investigations of possible wrongdoing are usually of what is of interest to the public.

There was something interesting I thought of when reading all the various news stories regarding this clause in the financial reform bill - the accusations that the "media" missed this important detail, opting to gloss over details of the bill to discuss the Consumer Financial Protection Bureau.  I find this argument ridiculous because as you may have noticed, the bill was signed last week and reports of this clause are now surfacing, and they are only surfacing because of a denied request by Fox News.

Where were these other investigative journalists before the bill was signed?

By them also not reporting on this clause, does that not make them part of the media they criticize?

I found a Newsbusters blog by Matt Robare blasting the media. "Journalists criticized the Bush Administration's lack of transparency in ways they have thus far refused to do so with Obama," wrote Robare.

I had found a very interesting article regarding this matter by Melissa Preddy for the Reynolds Center, which quotes SEC spokesperson John Nester as saying the new law only clarifies an existing exemption:
"The new provision applies to information obtained through examinations or derived from that information.  We are expanding our examination program’s surveillance and risk assessment efforts in order to provide more sophisticated and effective Wall Street oversight. The success of these efforts depends on our ability to obtain documents and other information from brokers, investment advisers and other registrants. The new legislation makes certain that we can obtain documents from registrants for risk assessment and surveillance under similar conditions that already exist by law for our examinations. Because registrants insist on confidential treatment of their documents, this new provision also removes an opportunity for brokers, investment advisers and other registrants to refuse to cooperate with our examination document requests."
Preddy also noted that when reviewing the SEC's annual reports regarding the FOIA requests, the number of full and partial denials was rather low when compared to the number of requests - the number of requests granted in full was almost three times higher then those denied in full.
This one from 2009 indicates that of 8,285 requests processed last year, only 1,278 were granted in full and 374 were partially denied. There were 544 full denials based on exemptions (where this matter would fall) and 6,089 denials in all. Of those, the bulk were due to “no information found,” as well as cancellations, fee issues, lost records and other administrative matters.

Trade secrets, confidential intraagency communication and privacy issues accounted for most of those 544 full denials.
It is this author's opinion that Fox is just overreacting to a broadly-written piece of legislation, and they are just upset that they didn't report on this matter before their request got denied, and as we all know, Fox is the tea party "news" channel of choice, so they would obviously make an opportunistic run at this story.  The right-wing supporters of both Fox and the tea parties disliked this bill from the start and would find any reason to dislike it even further - in their eyes, they would have wanted the president to veto the reform of the entire financial sector over one little clause.

Would they have scrutinized past Republican presidents the same way?

Robare likes to think so, pointing to an article by Daniel Schorr written four years ago regarding an executive order by President Bush:
LBJ was not the last president to find comfort in secrecy. More recently, President Bush, by executive order, overrode the law providing for the release of presidential papers after 12 years. It may or may not be relevant that this protected his father's files as President Reagan's vice president during the Iran-Contra affair.
Apparently one president creating executive orders to possibly cover up his father's involvement in a 1980s scandal that involved the sale of arms to Iran in order to fund Nicaraguan rebels is the same as congress passing a broadly written re-write of a past SEC exemption, eventually being signed into law by another president.

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