There is still anxiety over the security of financial information sent over the Internet. Both vendors and consumers who would like to take advantage of the Internet as a forum for commerce continue to be uncertain about whether credit card information can be transmitted without constant worry that information will be hijacked or go astray in some way that will have deleterious results. While this may be one of the most pressing current technological problems on the Internet, there already exists an interesting federal web of access and privacy policies concerning records of financial institutions. Some of these are so obscure that few even know of their existence, while others have been in place for so long with little legislative scrutiny that it makes sense for Congress to take a hard look at the original policy and decide whether it should be affirmed or updated.
While there may be ancillary policies, the major privacy protection for bank records is the Right to Financial Privacy Act. Congress passed the Act in response to a Supreme Court decision which ruled that a customer had no privacy rights attached to his or her bank account and that the transactional information belonged to the institution. If Congress thought it was correcting this decision in the Right to Financial Privacy Act, it is unclear to an observer exactly how it thought the statute would accomplish this. Essentially, the Act is a procedural statute which requires government agencies to notify a financial institution of their need to see an individual's financial records. The bank then is required to notify the customer. As long as the government follows the procedural rules, there is no basis on which to deny access except, perhaps, that the agency's reasons for requesting the records are not adequate. In the mid-1980s, Congress amended the Act to allow for non-notification in the case of national security and various criminal investigations. The Act also provides that notice can be delayed under certain circumstances. While the statute allows most individuals to know that the FBI or some other agency is reviewing their bank records, it offers no real protection for the individual. There are perhaps 20 litigated cases, almost all of them involving the bank and the agency.
For those interested in access to government records concerning financial institutions, the obstacles to disclosure are almost insurmountable. When Congress passed the Freedom of Information Act in 1966, it attached two specific exemptions to the already existing set of seven. Apparently pushed by two powerful politicians -- Sen. Hubert Humphrey (D-Minn.) and Sen. Everett Dirksen (R-Ill.) -- Exemption 8 provided protection for bank records, while Exemption 9, passed at the behest of the oil industry, covered wells.
Exemption 8 allows agencies to withhold information "contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions."
There was little interest in bank records during the early years of the FOIA, and Exemption 8 was little used and little scrutinized. Not until the consumer movement resulted in legislation like the Truth in Lending Act, which required banks to more adequately explain the terms on which money was lent to consumers, or the Community Reinvestment Act, which required neighborhood banks to lend some money for local community investment, did the interest in government information on banks become more pronounced. But when public interest groups tried to learn more about the performance of banks under such laws, the agencies frequently cited Exemption 8 as the reason why those records should not be disclosed.
When Consumers Union tried to get records from the government, the D.C. Circuit Court of Appeals sided with the agency, noting that "if Congress has intentionally and unambiguously crafted a particularly broad, all-inclusive definition, it is not our function, even in the FOIA context, to subvert that effort." Although the legislative history of the exemption implied that it was meant to protect against a run on a bank, the Court in a later decision pointed out that Congress had provided "absolute protection regardless of the circumstances underlying the regulatory agency's receipt or preparation of examination, operating or condition reports." The courts have consistently ruled that Exemption 8 is virtually impregnable.
A Change In Attitude
Exemption 8 is not a mandatory exception, and agencies are not required to claim it for any record that could possibly be withheld under it. There has been some change in attitude recently. During the 1980s, when the country first went through the S&L crisis and then through a similar banking crisis, the media suddenly became interested in bank examination records in a big way. But even in cases where a financial institution had failed and there were no successor interests to its assets and liabilities, financial agencies still told reporters they could not have the government's records. That "no access" attitude has changed over time, and several of the financial agencies now routinely disclose a considerable amount of information. The leader in this effort is the Office of the Comptroller of the Currency, which is perhaps the only federal agency with a fax-on-demand system set up to facilitate access requests.
There have been some outside legislative and administrative policy pressures as well. The Federal Deposit Insurance Corporation Improvement Act of 1991 requires the FDIC to disclose reports prepared as a result of a loss to an insured depository institution. While any information which could identify individual customers may be removed, the statute expressly states that the agency "shall disclose the report upon request under [the FOIA] without excising ... any information about the insured depository institution under [Exemption 8]." Further, Attorney General Janet Reno's 1993 memo to agencies encouraging the use of discretionary disclosures where there is no foreseeable harm from disclosure applies very clearly to the universe of records under Exemption 8. The Justice Department notes that "given the breadth of this exemption, and its purely institutional nature, the application of the 'foreseeable harm' standard holds potential for increased agency disclosure as a matter of administrative discretion -- particularly regarding factual portions of bank examination reports and related documents."
But such Justice Department encouragement does not necessarily result in more openness on the part of financial agencies. In 1979, the Federal Open Market Committee -- the committee within the Federal Reserve that sets monetary policy -- asked the Supreme Court to decide whether or not it had to disclose its records. While there was no FOIA exemption that precisely covered the records, the Court ruled that under Rule 26(c) of the Federal Rules of Civil Procedure, there existed a temporal privilege protecting confidential business information generated by the government. The Court decided the records could be protected under the privilege, but, by the privilege's very terms, the coverage was limited by the passage of time. However, the actual amount of time needed to protect the records was never established.
Several years ago, this unsettled dispute caught the attention of Rep. Henry Gonzalez (D-Texas), who was chairman of the House Banking Committee. He dragged Alan Greenspan, head of the Federal Reserve, before the committee to explain why these records needed to be kept confidential. Throughout, Greenspan held firm that the records of Open Market Committee meetings must be withheld for a minimum of five years. Gonzalez suggested something on the scale of 60 days, a time frame that anecdotal evidence suggests is closer to reality than Greenspan's recommendation. Gonzalez apparently dropped the issue and nothing was ultimately settled. But the dust-up goes to show that even today the disclosure of financial information is as prickly a subject as ever.
Harry Hammitt is editor/publisher of "Access Reports," a news-
letter published in Lynchburg, Va., covering open government laws and information policy issues. E-mail: <firstname.lastname@example.org>.
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