McKinley v. Board of Governors of the Federal Reserve System

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 21, 2011 Decided June 3, 2011

No. 10-5353

VERN MCKINLEY ,

APPELLANT

v.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:09-cv-01263)

Michael Bekesha argued the cause for the appellant. Paul

J. Orfanedes was on brief.

Samantha L. Chaifetz, Attorney, United States Department

of Justice, argued the cause for the appellee. Tony West,

Assistant Attorney General, Beth S. Brinkmann, Deputy

Assistant Attorney General, Mark B. Stern, Attorney, Katherine

H. Wheatley, Associate General Counsel, Board of Governors of

the Federal Reserve System, and Yvonne F. Mizusawa, Senior

Counsel, were on the brief. R. Craig Lawrence, Assistant

United States Attorney, entered an appearance.

Before: HENDERSON , GARLAND and GRIFFITH , Circuit

Judges.

2

Opinion for the Court filed by Circuit Judge HENDERSON .

KAREN LE CRAFT HENDERSON , Circuit Judge: In December

2008 Vern McKinley (McKinley) submitted a request pursuant

to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, to

the Board of Governors of the Federal Reserve System (Board)

seeking information related to the Board’s March 14, 2008

decision to authorize the Federal Reserve Bank of New York

(FRBNY) to provide a temporary loan to The Bear Stearns

Companies Inc. (Bear Stearns) through an extension of credit to

JPMorgan Chase & Co. (JP Morgan). The Board produced

documents in response to McKinley’s request but withheld

others pursuant to FOIA Exemptions 4, 5, 6 and 8. McKinley

filed suit in district court to compel disclosure of the withheld

documents. He now appeals the district court’s entry of

summary judgment in favor of the Board.

I.

We begin with a brief overview of the Federal Reserve

System before describing the events surrounding the Board’s

March 14, 2008 loan decision and McKinley’s FOIA request.

A. Overview of Federal Reserve System

The Congress created the Federal Reserve System in 1913

to serve as the nation’s central bank. It is not a single entity “but

rather a composite of several parts, both public and private,

organized on a regional basis with a central governmental

supervisory authority.” Reuss v. Balles, 584 F.2d 461, 462 (D.C.

Cir. 1978). Two of the parts are relevant here—the Board and

the Federal Reserve Banks (Reserve Banks). The Board,

composed of seven members appointed by the President and

confirmed by the Senate, is the central supervisory authority of

the Federal Reserve System. 12 U.S.C. § 241. There are

currently twelve Reserve Banks, each located and operating

3

within a specific region of the country.1 A bank organized under

the laws of any State or the District of Columbia may apply to

the Board to join the Federal Reserve System. 12 U.S.C. § 321.

On joining, the bank purchases stock of the Reserve Bank

responsible for the region of the country where the bank is

located and thereby becomes a member bank. Id. Additionally,

all national banks, that is, banks chartered under the National

Bank Act of 1864 (formerly Act of June 3, 1864, ch. 106, 13

Stat. 99) (codified as amended in scattered sections of 12

U.S.C.); see Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d

638, 640 (D.C. Cir. 2000) (“The National Bank Act of 1864 . . . ,

as amended, provides for the chartering of national banks.”),

must join the Federal Reserve System by purchasing stock of the

Reserve Bank located in its district. 12 U.S.C. § 222. The

Reserve Banks, then, “are private corporations whose stock is

owned by the member commercial banks within their districts.”

Comm. for Monetary Reform v. Bd. of Governors of Fed.

Reserve Sys., 766 F.2d 538, 540 (D.C. Cir. 1985). Accordingly,

they have the power to make contracts, to sue and be sued, to

appoint a president and vice presidents, to prescribe bylaws and

to perform other acts consistent with a private corporation. 12

U.S.C. § 341.

Notwithstanding the foregoing powers, the Board exercises

significant supervisory authority over the Reserve Banks. For

example, the Board appoints three of the nine directors of each

Reserve Bank, 12 U.S.C. § 302; the Board approves the

compensation a Reserve Bank pays to its directors, id. § 307; the

Board approves each Reserve Bank’s selection of its president

and first vice president, id. § 341; the Board can suspend or

remove any officer or director of a Reserve Bank, id. § 248(f);

1

The Board can readjust the federal reserve districts, subject to

the requirement that there be at least eight and no more than twelve.

12 U.S.C. § 222.

4

and the Board can “examine at its discretion the accounts,

books, and affairs of each Federal reserve bank and of each

member bank and . . . require such statements and reports as it

may deem necessary,” id. § 248(a)(1). The Reserve Banks are

authorized to lend money to member banks. Id. § 343. “In

unusual and exigent circumstances, the [Board] . . . may

authorize any Federal reserve bank” to lend money to a non-

member institution. Id. § 343(A). Before doing so, however,

the Reserve Bank must “obtain evidence that [the institution] is

unable to secure adequate credit accommodations from other

banking institutions.” Id.

B. Bear Stearns Financing and FOIA Request

In early March 2008 the Board became aware that Bear

Stearns, an important participant in many financial markets, was

experiencing severe liquidity problems and might soon declare

bankruptcy. Stefansson Decl. ¶ 7.2 Bear Stearns was a holding

company comprised partly of registered broker-dealers and, as

such, was regulated by the United States Securities and

Exchange Commission (SEC), not the Board. Winter Decl.

¶¶ 10-11.3 Moreover, because Bear Stearns was not a depository

institution, it was ineligible to borrow through the Federal

Reserve’s regular short-term lending program. Stefansson Decl.

¶ 7. The tools with which the Board could respond to Bear

Stearns’s liquidity problems were accordingly limited.

Believing that a Bear Stearns bankruptcy would have far-

2

Coryann Stefansson is an Associate Director of the Board’s

Division of Banking Supervision and Regulation, a position she has

held since May 2007. Previously she was an FRBNY Assistant Vice

President in Bank Supervision and Regulation from 1998 until 2007.

Stefansson Decl. ¶ 1.

3

Margaret Winter is the FOIA and Privacy Act Officer of the

United States Securities and Exchange Commission. Winter Decl. ¶ 1.

5

reaching and negative effects on financial markets, however, the

Board and Reserve Bank staff surveyed those institutions subject

to the Board’s regulation to assess their exposure to Bear

Stearns. Id. ¶ 8. In particular, they sought to ascertain the

exposure of large complex banking organizations (LCBOs).4 Id.

On March 13, 2008 the SEC notified the Board and the FRBNY

that Bear Stearns had inadequate resources to meet its

obligations and planned to declare bankruptcy the following

morning. Id. ¶ 7 The Board met the following day—March

14—and determined “that, given the fragile condition of the

financial markets at the time, the prominent position of Bear

Stearns in those markets, and the expected contagion that would

result from the immediate failure of Bear Stearns, the best

alternative available was to provide temporary emergency

financing to Bear Stearns through an arrangement with

JPMorgan Chase & Co.” Thro Decl. Ex. A (minutes of Board

3/14/08 meeting).5 The Board accordingly authorized the

FRBNY to extend credit to JP Morgan to allow JP Morgan to

provide a temporary loan to Bear Stearns. The FRBNY, in turn,

approved the loan.6 The loan allowed Bear Stearns to avoid

4

“LCBOs are characterized by the scope and complexity of their

domestic and international operations; their participation in large

volume payment and settlement systems; the extent of their custody

operations and fiduciary activities; and the complexity of their

regulatory structure, both domestically and in foreign jurisdictions.

To be designated as an LCBO, a bank holding company or foreign

banking organization supervised by the Federal Reserve must meet

specified criteria to be considered a significant participant in at least

one critical or other key financial market.” Stefansson Decl. ¶ 3.

5

Alison Thro is “the most senior attorney in the Board’s Legal

Division responsible for reviewing FOIA requests.” Thro Decl. ¶ 1.

6

The FRBNY made the loan through JP Morgan because Bear

Stearns was not a depository institution and therefore was not eligible

6

filing for bankruptcy but, on March 16, the Board and the

FRBNY authorized a second loan to JP Morgan to facilitate JP

Morgan’s acquisition of Bear Stearns.

In December 2008 McKinley submitted to the Board a

FOIA request for “further detail on information contained in the

[March 14, 2008] minutes of the Board.” Thro Decl. Ex. A

(FOIA request). He specifically sought “any supporting memos

or other information that detail the ‘expected contagion that

would result from the immediate failure of Bear Stearns’ and the

related conclusion that ‘this action was necessary to prevent,

correct, or mitigate serious harm to the economy or financial

stability’ as described in the meeting minutes.” Id.

After having received no response from the Board by July

2009, McKinley filed a complaint in district court seeking a

declaratory judgment that FOIA entitles him to disclosure of the

information he requested and seeking disclosure of that

information. Compl. ¶¶ 36-47. The Board then produced 120

pages of previously released or publicly available documents on

August 11, 2009. McKinley v. FDIC, 744 F. Supp. 2d 128, 133

(D.D.C. 2010). On September 30, 2009 the Board produced an

additional forty-eight pages in full and twenty-seven pages with

information redacted. Id. It also identified and withheld 163

pages pursuant to FOIA Exemptions 4, 5, 6 and 8. Id. Eight of

the 163 withheld pages originated with the SEC and the Board

referred the disclosure determination regarding those documents

to receive funds directly from the FRBNY’s discount window.

Stefansson Decl. ¶ 7. “The Discount W indow is the long-standing

program through which the twelve Federal Reserve Banks make short-

term loans (often overnight) to depository institutions, and it can serve

as an emergency, back-up source of liquidity for borrowing depository

institutions that lack other options.” Bloomberg, L.P. v. Bd. of

Governors of Fed. Reserve Sys., 601 F.3d 143, 145-46 n.1 (2d Cir.

2010) (internal quotation marks omitted).

7

to the SEC.7 Id. The remaining withheld pages contain

information collected and used by the Board and the FRBNY to

assess the exposure of regulated financial institutions to Bear

Stearns as well as communications between Board and FRBNY

personnel. See Thro Decl. ¶¶ 17-23 (describing withheld

documents); Stefansson Decl. ¶¶ 12-14 (same). On January 7,

2010 the SEC informed McKinley that it was withholding the

eight documents referred to it by the Board pursuant to FOIA

Exemptions 5 and 8. Winter Decl. ¶ 5.

The Board moved for summary judgment on February 1,

2010 and McKinley filed a cross-motion for summary judgment.

The Board produced a Vaughn index identifying the withheld

material by document (rather than page), briefly describing the

withheld material and listing the FOIA exemption pursuant to

which the document was withheld. See Vaughn v. Rosen, 484

F.2d 820, 826-28 (D.C. Cir. 1973). McKinley does not

challenge the Board’s withholding of five documents pursuant

to FOIA Exemption 6. He challenges only the Board’s reliance

on FOIA Exemptions 4, 5 and 8. The district court held that the

withheld documents are protected from disclosure by FOIA

Exemption 5 or, in the alternative, by Exemption 8 and granted

summary judgment in favor of the Board. McKinley, 744 F.

Supp. 2d at 135-45. The court did not address the applicability

vel non of FOIA Exemption 4.8 Id. at 145. McKinley timely

filed a notice of appeal.

7

McKinley does not discuss the SEC documents on appeal and

has thus waived any challenge to the withholding of those documents.

See New York v. EPA, 413 F.3d 3, 20 (D.C. Cir. 2005) (argument not

raised in opening brief waived).

8

McKinley’s complaint originally included FOIA claims against

the Federal Deposit Insurance Corporation but they were ultimately

dismissed as moot. McKinley, 744 F. Supp. 2d at 131 n.1 (internal

citations omitted).

8

II.

We review the district court’s grant of summary judgment

de novo. Sussman v. U.S. Marshals Serv., 494 F.3d 1106, 1111-

12 (D.C. Cir. 2007). Summary judgment is proper if there is no

genuine issue as to any material fact and the moving party is

entitled to judgment as a matter of law. Id.

FOIA requires federal agencies to disclose records upon

request unless the records fall within one or more enumerated

exemptions. Dep’t of Interior v. Klamath Water Users

Protective Ass’n, 532 U.S. 1, 7 (2001); see 5 U.S.C. § 552. The

exemptions are narrowly construed so as not to “ ‘obscure the

basic policy that disclosure, not secrecy, is the dominant

objective of the Act.’ ” Klamath, 532 U.S. at 8 (quoting Dep’t

of Air Force v. Rose, 425 U.S. 352, 361 (1976)). The relevant

exemption is Exemption 5, which allows an agency to withhold

disclosure of a record if the record meets two requirements: (1)

it is an “inter-agency or intra-agency memorandum[] or letter[]”

that (2) “would not be available by law to a party other than an

agency in litigation with the agency.”9 5 U.S.C. § 552(b)(5).

McKinley argues the withheld material fails to satisfy both

requirements.

A. Inter-Agency or Intra-Agency Memoranda

The Board concedes that the Federal Reserve Banks,

including the FRBNY, are not federal agencies and therefore the

withheld documents are not inter-agency memoranda. The

9

Because we conclude that Exemption 5 shields from disclosure

all of the withheld documents, we do not reach the applicability vel

non of Exemption 8, which allows an agency to withhold disclosure

of a record “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.”

5 U.S.C. § 552(b)(8).

9

Board further concedes that the Reserve Banks are not

components of the Board, which concession would appear to

disqualify the withheld documents from constituting intra-

agency memoranda or letters. Under the “consultant corollary”

to Exemption 5, however, we interpret “intra-agency” “to

include agency records containing comments solicited from non-

governmental parties.” Nat’l Inst. of Military Justice v. U.S.

Dep’t of Defense (NIMJ), 512 F.3d 677, 680, 682 (D.C. Cir.),

cert. denied, 129 S. Ct. 775 (2008). “When an agency record is

submitted by outside consultants as part of the deliberative

process, and it was solicited by the agency, we find it entirely

reasonable to deem the resulting document to be an ‘intra-

agency’ memorandum for purposes of determining the

applicability of Exemption 5.” Id. at 680 (quoting Ryan v. Dep’t

of Justice, 617 F.2d 781, 790 (D.C. Cir. 1980)). Thus we held

in NIMJ that the consultant corollary protected opinions and

recommendations submitted by non-governmental lawyers to the

United States Department of Defense regarding the

establishment of military commissions to try suspected terrorists

after the September 11, 2001 attacks. Id. at 678-79.

McKinley does not dispute the “consultant corollary” but

challenges its application to the withheld documents on two

grounds. First, in reliance on the holding in Department of

Interior v. Klamath Water Users Protective Ass’n, 532 U.S. 1

(2001), he argues the Board failed to demonstrate that the

FRBNY’s interest is identical to that of the Board. At issue in

Klamath was a FOIA request submitted to the United States

Department of the Interior’s Bureau of Indian Affairs (Bureau)

seeking disclosure of communications between the Bureau and

certain Indian tribes—namely, six documents prepared by Indian

tribes at the Bureau’s request and one document prepared by the

Bureau, all of which related to the allocation of water rights

among competing users/uses. 532 U.S. at 6. The United States

Supreme Court held that the requested documents were not

protected from disclosure under Exemption 5. The Court noted

10

that in the “typical” case in which a court applies the consultant

corollary, “the consultant does not represent an interest of its

own, or the interest of any other client, when it advises the

agency that hires it.” Id. at 11. “[The consultant’s] only

obligations are to truth and its sense of what good judgment

calls for, and in those respects the consultant functions just as an

employee would be expected to do.” Id. The Indian tribes, by

contrast, “necessarily communicate with the Bureau with their

own, albeit entirely legitimate, interests in mind.” Id. at 12.

Although that “fact alone distinguishes tribal communications

from the consultants’ examples recognized by several Courts of

Appeals,” the Court explained that the “distinction is even

sharper, in that the [Indian] Tribes are self-advocates at the

expense of others seeking benefits inadequate to satisfy

everyone.” Id. Lest there be any confusion, the Court restated

the “dispositive point”: “that the apparent object of the Tribe’s

communications is a decision by an agency of the Government

to support a claim by the Tribe that is necessarily adverse to the

interests of competitors.” Id. at 14.

Unlike the Indian tribes, the FRBNY “[did] not represent an

interest of its own, or the interest of any other client, when it

advise[d] the [Board]” on the Bear Stearns loan. Id. at 11. As

McKinley’s counsel acknowledged at oral argument, the

FRBNY is an “operating arm” of the Board. Oral Arg. 11:00-

11:05. McKinley nonetheless claims that the FRBNY

represented its own interest in its consultations with the Board

regarding Bear Stearns because the FRBNY had an independent

statutory duty to “obtain evidence that [Bear Stearns was]

unable to secure adequate credit accommodations from other

banking institutions” before making the loan. See 12 U.S.C.

§ 343(A). That the FRBNY had to obtain such evidence before

it could approve the loan authorized by the Board does not mean

its interest diverged from the Board’s interest, however, and to

claim otherwise, we believe, misconstrues the nature of the

Federal Reserve System. The Board, together with the Federal

11

Open Market Committee—a body composed of the Board

members and five presidents or first vice presidents of the

Reserve Banks, 12 U.S.C. § 263—are statutorily mandated to

“maintain long run growth of the monetary and credit aggregates

commensurate with the economy’s long run potential to increase

production, so as to promote effectively the goals of maximum

employment, stable prices, and moderate long-term interest

rates,” 12 U.S.C. § 225a. See Fasano v. Fed. Reserve Bank of

N.Y., 457 F.3d 274, 277-78 (3d Cir. 2006) (“The individual

Federal Reserve Banks serve as the foundation for the Federal

Reserve System. . . . The individual Federal Reserve Banks

carry out the monetary policy . . . formulated [by the Federal

Open Market Committee]. The Board . . . loosely oversees the

Federal Reserve Banks’ operations.”), cert. denied, 549 U.S.

1115 (2007). Board regulations make clear that “[t]he Federal

Reserve System extends credit with due regard to the basic

objectives of monetary policy and the maintenance of a sound

and orderly financial system.” 12 C.F.R. § 201.1(b). As noted,

the Board and Reserve Banks work together “to assist in

achieving national economic goals through [the Reserve

System’s] influence on the availability and cost of bank

reserves, bank credit, and money.” Reuss v. Balles, 584 F.2d

461, 462 (D.C. Cir. 1978). “The key to success of the [Reserve]

System is harmonious interaction between and among [its]

component parts.” Id. Statutes, regulations and case law make

clear, therefore, that the Board and the Reserve Banks share a

common goal, namely “the maintenance of a sound and orderly

financial system.” 12 C.F.R. § 201.1(b). That the Congress

requires both the Board and the relevant Reserve Bank (here,

FRBNY) separately to determine that the loan made to Bear

Stearns through JP Morgan promotes the maintenance of a

sound and orderly financial system does not mean that the

Board’s and the FRBNY’s interests diverged in deciding to

make the loan.

12

McKinley also claims the Board failed to show it solicited

the withheld material from the FRBNY as our precedent

requires. See, e.g., NIMJ, 512 F.3d at 680 (“[A]n agency record

. . . submitted by outside consultants as part of the deliberative

process[] and . . . solicited by the agency [is] an ‘intra-agency’

memorandum for purposes of determining the applicability of

Exemption 5.” (emphasis added) (internal quotation marks

omitted)); id. at 681, 683; Ryan, 617 F.2d at 790 (withheld

records “were generated by an initiative from the Department of

Justice, i.e., the questionnaire sent out by the Department to the

Senators”). The Stefansson declaration, however, adequately

demonstrates that the Board solicited the material from the

FRBNY. When news of Bear Stearns’s financial straits reached

the Board, it began to focus on the effects of a Bear Stearns

bankruptcy on the financial markets and particularly on LCBOs

and other organizations supervised by the Board. Stefansson

Decl. ¶ 8. The Board acted against a “backdrop” of significant

turmoil and uncertainty in the financial markets. Id. ¶ 7.

The deterioration of the U.S. housing market late in the

summer of 2007 precipitated a sharp rise in uncertainty

in financial markets about the value of structured or

securitized assets. As demand for these products fell,

funding pressures increased for a variety of financial

institutions. As uncertainty grew over the magnitude

of losses at financial institutions, these institutions

became unwilling to lend to each other even against

high-quality collateral, asset prices fell, and the

availability of borrowing declined significantly. As a

result, financial institutions faced severe liquidity

pressures. These pressures accelerated rapidly between

mid-January and mid-March 2008 . . . . If left

unabated, this dynamic posed a risk of widespread

insolvencies and severe and protracted damage to the

financial system and, ultimately, to the economy as a

whole.

13

Id. ¶ 6. The Board thus found itself reacting to what it believed

to be an emergency, as evidenced by its decision “to provide

temporary emergency financing to Bear Stearns.” Thro Decl.

Ex. A (minutes of Board 3/14/08 meeting) (emphasis added).

“[A]s part of the Board’s consideration of potential responses to

Bear Stearns’ [sic] funding difficulties” and “in accordance with

well-established supervisory processes, Board and Reserve Bank

staff responsible for LCBO supervision surveyed the LCBOs for

purposes of assessing the LCBOs’ real-time exposures to Bear

Stearns.” McKinley, 744 F. Supp. 2d at 136 (quoting Stefansson

Decl. ¶ 8). The monitoring of LCBOs and advising the Board

of their financial condition “is administered at the Federal

Reserve Banks.” Stefansson Decl. ¶ 2; see also 12 U.S.C.

§ 248(a)(1) (Board may “examine at its discretion the accounts,

books, and affairs of each Federal reserve bank and of each

member bank and . . . require such statements and reports as it

may deem necessary”); id. § 325 (Federal Reserve member

banks are “subject to examinations made by direction of the

[Board] or of the Federal reserve bank by examiners selected or

approved by the [Board]”); id. § 483 (“Every Federal reserve

bank shall at all times furnish to the [Board] such information as

may be demanded concerning the condition of any member bank

within the district of the said Federal reserve bank.”). Thus, to

aid in its deliberative process, the Board sought information

from the FRBNY about the financial condition and exposures of

institutions monitored by the FRBNY. The FRBNY did not

simply provide the information, unprompted, to the Board.

Accordingly, we conclude the withheld material constitutes

“intra-agency memorandums or letters” under FOIA Exemption

5. We turn now to the second prong of Exemption 5.

B. Deliberative Process Privilege

Intra-agency memoranda are exempt from disclosure under

Exemption 5 only if they “would not be available by law to a

party other than an agency in litigation with the agency.” 5

14

U.S.C. § 552(b)(5). To satisfy the second requirement of

Exemption 5, the record must be non-disclosable “under one of

the established civil discovery privileges—here, under the

‘deliberative process’ privilege.” NIMJ, 512 F.3d at 680 n.4

(citing Klamath, 532 U.S. at 8-9). “To qualify for Exemption 5

protection under the deliberative process privilege, ‘an agency’s

materials must be both “predecisional” and a part of the

“deliberative process.” ’ ” Id. (quoting Formaldehyde Inst. v.

Dep’t of Health & Human Servs., 889 F.2d 1118, 1121 (D.C.

Cir. 1989)). McKinley acknowledges that the withheld material

is predecisional but argues that the record is “deliberative” only

if its disclosure would harm the agency’s decisionmaking

process. The Congress enacted FOIA Exemption 5, however,

precisely because it determined that disclosure of material that

is both predecisional and deliberative does harm an agency’s

decisionmaking process. As we have explained, Exemption 5

was created to protect the deliberative process of the

government, by ensuring that persons in an advisory

role would be able to express their opinions freely to

agency decision-makers without fear of publicity. In

the course of its day-to-day activities, an agency often

needs to rely on the opinions and recommendations of

temporary consultants, as well as its own employees.

Such consultations are an integral part of its

deliberative process; to conduct this process in public

view would inhibit frank discussion of policy matters

and likely impair the quality of decisions.

Ryan, 617 F.2d at 789-90; see also Klamath, 532 U.S. at 8-9

(“The deliberative process privilege rests on the obvious

realization that officials will not communicate candidly among

themselves if each remark is a potential item of discovery and

front page news, and its object is to enhance the quality of

agency decisions by protecting open and frank discussion among

those who make them within the Government.” (internal

15

quotation marks and citations omitted)); Judicial Watch, Inc. v.

Dep’t of Energy, 412 F.3d 125, 129 (D.C. Cir. 2005)

(deliberative process privilege “ ‘reflect[s] the legislative

judgment that the quality of administrative decision-making

would be seriously undermined if agencies were forced to

“operate in a fishbowl” because the full and frank exchange of

ideas on legal or policy matters would be impossible.’ ”

(alteration in original) (quoting Tax Analysts v. IRS, 117 F.3d

607, 617 (D.C. Cir. 1997))); Formaldehyde, 889 F.2d at 1125

(“ ‘[H]uman experience teaches that those who expect public

dissemination of their remarks may well temper candor with a

concern for appearances . . . to the detriment of the

decisionmaking process.’ ” (ellipsis and emphasis in original)

(quoting NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150-51

(1975))); Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d

854, 866 (D.C. Cir. 1980) (deliberative process privilege

protects documents “which would inaccurately reflect or

prematurely disclose the views of the agency”). Our role is not

to second-guess that congressional judgment on a case-by-case

basis. Attempting to do so, moreover, would prove

impracticable:

It would be impossible for courts to administer a rule

of law to the effect that some but not all information

about the decisional process may be disclosed without

violating Exemption 5. Courts would become

enmeshed in a continual process of estimating or, more

accurately, guessing about the adverse effects on the

decisional process of a great variety of combinations of

pieces of information. That would inevitably lead

courts on some occasions to undercut legitimate

Exemption 5 protections. Indeed, such a procedure

would not result in a rule at all. Agencies would have

to pass on requests wholly impressionistically, subject

to the impressionistic second-guessing of the courts.

16

That is hardly a satisfactory or efficient way of

implementing FOIA.

Wolfe v. Dep’t of Health & Human Servs., 839 F.2d 768, 775

(D.C. Cir. 1988) (en banc).

Moreover, the Board has demonstrated that disclosure of the

withheld material would “discourage candid discussion within

the agency and thereby undermine the agency’s ability to

perform its functions.” Formaldehyde, 889 F.2d at 1122

(internal quotation marks omitted). As part of the “bank

supervisory process,” “[s]upervised institutions frequently

provide [Board and Reserve Bank examiners] with detailed,

highly sensitive commercial information . . . that they do not

customarily disclose to the public,” disclosure of which “is

likely to cause substantial competitive harm to the LCBOs.”

Stefansson Decl. ¶ 15. For example, an LCBO competitor could

use the information “to assess sensitive trading relationships and

credit relationships” and could “exploit the information . . . to

weaken a specific entity and cause weaknesses in its liquidity

position” by “pull[ing] or accelerat[ing] funding facilities the

competitor had outstanding to the LCBO.” Id. A competitor

could also “use the data to underbid the LCBO in the private

funding markets.” Id. Information that revealed the LCBO

faced a “funding shortage” could “cause some retail and

commercial customers to move their business to other banks and

may cause analysts to downgrade the LCBO’s stock.” Id. In

short, information collected by the Board and Reserve Banks

from supervised institutions could harm those institutions if

disclosed to the public. For that reason, “[s]upervised

institutions rely on bank supervisors to protect the

confidentiality of information obtained through the supervisory

process” and “are willing to provide this information because

they know that the supervisors will maintain its confidentiality.”

Id. The Board and Reserve Banks “rely on the willingness of

supervised institutions to provide full information in order to

17

assure a robust supervisory environment.” Id. If supervised

institutions no longer believe the Board could or would maintain

the confidentiality of information it collects through the

supervisory process, they would be less willing to provide the

Board with the information it needs “to assure a robust

supervisory environment.” Disclosure of the type of

information withheld here, therefore, “would impair the Board’s

ability to obtain necessary information in the future[] and could

chill the free flow of information between the [supervised]

institutions and the Board and Reserve Bank[s].” Id.; see also

Winter Decl. ¶ 7 (“Release of this type of information would

have an inhibitive effect upon the development of policy and

administrative direction. In my opinion, SEC employees would

hesitate to offer their candid opinions to superiors or coworkers,

as well as colleagues in other federal agencies, if they knew that

their opinions of the moment might be made a matter of public

record at some future date.”).

C. Attorney Work Product Privilege

The Board also withheld one document under Exemption 5

pursuant to the attorney work product privilege. See Judicial

Watch, Inc. v. Dep’t of Justice, 432 F.3d 366, 369 (D.C. Cir.

2005) (“FOIA Exemption 5 incorporates the work-product

doctrine and protects against the disclosure of attorney work

product.”). “The work-product doctrine shields materials

‘prepared in anticipation of litigation or for trial by or for

another party or by or for that other party’s representative

(including the other party’s attorney, consultant, surety,

indemnitor, insurer, or agent).’ ” Id. (quoting Fed. R. Civ. P.

26(b)(3)). According to the Board, the withheld document “was

prepared by FRBNY attorneys in anticipation of litigation by

Bear Stearns shareholders related to the Board’s authorization

to extend credit to [Bear Stearns] indirectly through [JP

Morgan].” Vaughn Index Doc. No. 38 (Joint Appendix 97). On

appeal, McKinley argues only that the FRBNY does not come

18

within the consultant corollary and for that reason the Board

cannot claim the attorney work product privilege. Having

concluded that the FRBNY did indeed act as a consultant to the

Board, we reject McKinley’s argument. The FRBNY, acting as

the Board’s consultant, prepared the withheld document for the

Board in anticipation of litigation. Id. Accordingly, the Board

properly withheld the document under Exemption 5.10

For the foregoing reasons, we affirm the district court’s

grant of summary judgment to the Board.

So ordered.

10

In Bloomberg L.P. v. Board of Governors of the Federal

Reserve System, 601 F.3d 143, 145-46, 147 (2d Cir. 2010), the Second

Circuit recently held that records regarding loans made by the twelve

Reserve Banks to certain private banks in April and May

2008—specifically “the name of the borrowing bank, the amount of

the loan, the origination and maturity dates, and the collateral

given”—cannot be withheld under FOIA Exemption 4. The Board

argued before the district court that the withheld records were exempt

from disclosure under Exemption 5 but declined to appeal the district

court’s adverse ruling on Exemption 5. Id. at 146. Thus, the Second

Circuit did not address the applicability vel non of Exemption 5 to the

requested records. Id. at 146-47. Although the district court held the

requested records were not protected under Exemption 5, it did not

address the issues relevant here. The court accepted—because

Bloomberg did not dispute— the Board’s assertion that the withheld

records were inter-agency or intra-agency memorandums or letters.

Bloomberg L.P. v. Bd. of Governors of Fed. Reserve Sys., 649 F.

Supp. 2d 262, 280-81 (S.D.N.Y. 2009). Furthermore, the Board did

not rely upon the deliberative process privilege. Id. at 281-82.