Banking lobbyists are urging House leaders not to bring up the Freedom of Information Act Improvement Act of 2014, according to House, Senate and pro-bill sources.
The opposition, from unnamed banking interests, comes as the House nears adjournment. Supporters hope the House will squeeze the Senate bill (S 2520) on to the agenda in the final hours of the 2014 session. The bill recently passed the Senate without opposition and is very similar to legislation approved by the House earlier this year on a 410-0 vote.
The Senate committee report includes lengthy language underscoring the importance of protecting financial information. The paragraph, secured support for the bill by the chairman of the Senate Banking Committee, Sen. Tom Johnson (D-SD), sources said. Johnson received further assurances from Judiciary Committee Chairman Patrick Leahy (D-Vat.) during a scripted exchange on the Senate floor Dec. 9, just before the bill passed without dissent.
The relevant section of the report begins with a caution: “Extreme care should be taken with respect to disclosure under Exemption 8 which protects matters that are “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.” The quote is from the FOIA.
The report language (minus footnotes) continues:
Currently, financial regulators rely on Exemption 8, and other relevant exemptions in Section 552(b), to protect sensitive information received from regulated entities, or prepared in connection with the regulation of such entities, in fulfilling their goals of ensuring safety and soundness of the financial system, compliance with federal consumer financial law, and promoting fair, orderly, and efficient financial markets. Exemption 8 was intended by Congress, and has been interpreted by the courts, to be very broadly construed to ensure the security of financial institutions and to safeguard the relationship between the banks and their supervising agencies. The D.C. Circuit has gone so far as to state that in Exemption 8 Congress has provided “absolute protection regardless of the circumstances underlying the regulatory agency’s receipt or preparation of examination, operating or condition reports.” Nothing in this legislation shall be interpreted to compromise the stability of any financial institution or the financial system, disrupt the operation of financial markets or undermine consumer protection efforts due to the release of confidential information about individuals or information that a financial institution may have, or encourage the release of confidential information about individuals. This legislation is not intended to lessen the protection under Exemption 8 created by Congress and traditionally afforded by the courts.
Efforts to reach groups representing banking interests were not immediately successful.
House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., and Ranking Member Elijah E. Cummings, D-Md., have called on the House to pass the bill.
Senate Floor Colloquy, Too
Before voting for the bill, Johnson also received assurances from Leahy about the bill during the short floor debate on the bill Dec. 9. In the colloquy, Leahy said the amendments “are not intended to undermine the broad protection in Exemption 8 or to undermine the integrity of the supervisory examination process.”
The text of the exchange follows:
Mr. JOHNSON of South Dakota. Mr. President, I ask consent to engage in a colloquy with Senator Leahy, chairman of the Senate Judiciary Committee, regarding important aspects of S. 2520, the FOIA Improvement Act of 2014.
While I support the ultimate goal of this legislation, which seeks to increase government transparency, as the chairman of the Senate Banking Committee, I am also mindful of the need for government agencies to dutifully and carefully fulfill their oversight responsibilities of our Nation’s financial institutions and the health and welfare of our financial systems at-large. Financial regulatory agencies are tasked with ensuring the safety and soundness of the financial system, compliance with Federal consumer financial law, and promoting fair, orderly, and efficient financial markets. A critical component of effective oversight is the ability of a financial regulator to have unfettered access to information from a regulated institution. A financial institution should not have to fear that its regulator will be unable to protect the institution’s confidential information from disclosure. Since the passage of the Freedom of Information Act, Congress has recognized the importance of protecting this type of supervisory information as evidenced specifically in 5 U.S.C. _ 552(b)(8), commonly referred to as Exemption 8, and more generally in other exemptions. It is my understanding that nothing in S. 2520 is intended to limit the scope of the protections under Exemption 8, or other exemptions relevant to financial regulators; nor is the bill intended to require release of confidential information about individuals or information that a financial institution may have, the release of which could compromise the stability of the financial institution or the financial system, or undermine the consumer protection work by the regulators. Given that the release of confidential or sensitive information relating to oversight of regulated entities could cause harm to such entities, individuals, or the financial system, a financial regulatory agency could reasonably foresee that disclosure of such information requested under FOIA may harm an interest protected by Exemption 8. This is precisely why Congress continues to provide these statutory exemptions.
Mr. LEAHY. I thank Senator Johnson for his remarks and for his interest and support for this legislation. I agree that it is important to ensure that our financial regulators are able to do the work required to maintain the safety and soundness of our financial institutions. I also agree that the free flow of information between regulators and financial institution is important to this process. Exemption 8 was intended by Congress, and has been interpreted by the courts, to be very broadly construed to ensure the security of financial institutions and to safeguard the relationship between financial institutions and their supervising agencies. The proposed amendments to the Freedom of Information Act, FOIA , are not intended to undermine the broad protection in Exemption 8 or to undermine the integrity of the supervisory examination process. Moreover, much of the information that the government is permitted to withhold under Exemption 8, is also protected under Exemption 4, which exempts from disclosure commercial and financial information that is privileged or confidential. Exemption 4 covers information prohibited from disclosure under the Trade Secrets Act and similar laws, and as such does not provide for discretionary disclosure under FOIA . As with other exemptions that are based on separate legal restrictions, it is understood that the foreseeable harm standard will not apply to most of the information falling under Exemption 4. I will address these concerns, and I appreciate all the time and attention the Senator from South Dakota has given to this important legislation.
Mr. JOHNSON of South Dakota. I thank the Senator from Vermont for his work on this important matter and for working with me to clarify the scope of this bill. I hope the Senator from Vermont continues to work on these issues with the agencies to ensure that this new standard will not serve to undermine the broad protections currently afforded to confidential supervisory information and in turn undermine the cooperative relationship between regulators and their supervised institutions.
Filed under: What's New