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ASHTON I, Richard M. Ashton, declare as follows: Background 1. I am Deputy General Counsel of the Board of Governors ofthe Federal Reserve System (the "Board"). I have been Deputy General Counsel since 2005. Before being appointed Deputy General Counsel, I was Associate General Counsel, a position that I held since 1985. Prior to that, I was Assistant General Counsel, a position that I held since 1982. I joined the Board in 1976 as a staff attorney in the Legal Division. 2. In my position as Deputy General Counsel, I have responsibility for advising the Board on legal matters pertaining to a wide range of domestic and international banking matters, legislative matters, and overseeing the Litigation, Enforcement, and System Matters Group of the Legal Division, which includes about 22 attorneys and additional support staff. Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 1 of 143. In my capacity as Deputy General Counsel, I was involved in the Board's consideration of how to respond to the liquidity problems of American International Group ("AIG") and the Board's September 16,2008 decision to authorize the Federal Reserve Bank of New York ("FRBNY") to lend up to $85 billion to AIG, secured by substantially all of the assets of AIG. I have been informed that some information involved in these deliberations is responsive to a request under the Freedom of Information Act,S U.S.c. 552 CFOIA"), made by Vern McKinley (the "plaintiff") to the Board by email dated March 21, 2008 (FOIA # 2010-251) (the "AIG Request"). I have read that request and am familiar with its contents. I have also reviewed the Vaughn index of responsive documents provided to the plaintiff in connection with the AIG Request (the "AIG Vaughn Index"). Accordingly, the statements contained in this declaration are based upon my personal knowledge, upon information provided to me in my official capacity as Deputy General Counsel, and upon conclusions and determinations reached and made in accordance therewith. Background RegardingAIG 4. The Board is a federal agency composed of seven members appointed by the President and confirmed by Senate. In September 2008, there were five incumbent members ofthe Board. 5. Under the Federal Reserve Act, the Board has various authorities to authorize extensions of credit by the twelve regional Federal Reserve Banks ("FRBs"). In particular, section 13(3) of the Act, as in effect in 2008, provided that in unusual and exigent circumstances, the Board, by the affirmative vote of not less than five members, may authorize any FRB to extend credit to any individual, partnership, or corporation that is secured to the 2 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 2 of 14satisfaction of the lending FRB and meets other specified conditions. 12 U.S.c. 343 (2008). 6. On Friday, September 12,2008, officials of the FRBNY and the Board were notified by officials of AIG of an impending liquidity crisis at AIG. Among other things, AIG advised Federal Reserve staff of the company's i n ~ b i l i t y to roll over its maturing commercial paper, ongoing collateral calls associated with the derivative exposures of its financial products subsidiary, the withdrawal of securities lending counterparties from the securities lending program operated by the company's regulated insurance subsidiaries, and a potential downgrade ofthe company's credit ratings. At the time, AIG was one of the largest insurance companies in the world with total assets of more than $1 trillion. The Federal Reserve did not and does not have any supervisory authority over the company. 7. In the next several days, AIG officials contacted Federal Reserve officials about the possibility of an emergency loan from the Federal Reserve. The Federal Reserve strongly encouraged the company to pursue private solutions to its problems. Over the next few days, several senior staff members at the FRBNY and the Board, working with the President ofthe FRBNY, Timothy Geithner, and several members of the Board, including the Chairman and Vice Chairman, began to analyze and assess the extent and implications ofthe imminent financial crisis facing AIG. Among other things, Federal Reserve officials sought to form an opinion about the extent of the financial pressures facing the company, about the availability and effectiveness of any financial assistance from the private sector to resolve those pressures, about the likelihood and effectiveness of any regulatory relief the company may receive from the supervisors of its insurance 3 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 3 of 14operations, and the potential for widespread effects on the financial system and economy in general from AIG's financial troubles and possible collapse. The staff also considered possible statutory changes that may have been appropriate to address the issues raised by AIG's severe financial problems. 8. The purpose of this analysis was to assist and advise the Board members with regard to any decision they may make about whether to exercise the Board's emergency powers, including making a loan under section 13(3), should the circumstances relating to the deterioration of AIG's financial condition warrant and, if so, how such powers should be exercised. 9. In the days leading up to the Board's decision, Board members and staff requested information and advice from officers and staff of the FRBNY in order to assist the Board in weighing options and considering possible responses to the AIG liquidity crisis. The FRBNY's views and advice played an important role in the Board's decision-making process because, among other reasons, the FRBNY would make the actual loan to AIG under the provisions of section 13(3) in effect at the time because AIG was headquartered in New York. The Board solicited the FRBNY's opinions and advice as the potential lending FRB regarding the method and advisability of lending to AIG. Moreover, section 13(3) at the time required that, should the Board authorize such a loan, the FRBNY "obtain evidence" that AIG was "unable to secure adequate credit accommodations from other banking institutions," and that any loan to AIG be "secured to the satisfaction" of the FRBNY and subject to "such limitations, restrictions, and regulations" as the Board might prescribe. 12 U.S.c. 343 (2008). As a result, the statutory criteria in effect required the Board and FRBNY to act together to make a loan. In addition, because of 4 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 4 of 14the FRBNY's unique involvement in, and knowledge of, the financial markets through its conduct of open market operations and intervention in foreign exchange markets on behalf of the Federal Reserve System, the FRBNY was able rapidly to access and provide infonnation about the possible impact on financial institutions and markets of making or not making a loan. As a result, infonnation and advice from the FRBNY factored prominently in the process leading up to the Board's ultimate decision on September 16, 2008 to authorize a loan to AIG. 10. As part of the process of fonnulating its opinions and views on the advisability of Federal Reserve financial assistance with respect to AIG, Board officials sought the views and advice of senior staff at the U.S. Department ofthe Treasury ("Treasury"), which has responsibility and authority for financial stability issues generally. 11. On Monday, September 15, 2008, Lehman Brothers Holdings, Inc., a m ~ o r securities finn, filed for bankruptcy. Later that evening, the three major ratings agencies downgraded AIG's long-tenn debt ratings, resulting in substantial and immediate liquidity demands on AIG. At the same time, private investors and lenders tenninated their negotiations with AIG relating to a private sector solution to AIG's liquidity stresses and no such solution was reached. 12. At a meeting on Tuesday, September 16,2008, the Board, pursuant to section 13(3) and with the full support of the Treasury, authorized the FRBNY to extend credit to AIG in an amount up to $85 billion, secured by substantially all ofthe assets of AIG. President Geithner and other senior officials of the FRBNY as well as senior officials of the Treasury participated in this meeting. 13. As a legal officer of the Board, I personally participated in the Board's analysis and 5 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 5 of 14assessment of possible responses to AI G' s financial distress and in the Board's ultimate decision to authorize emergency lending by assisting the Board's General Counsel, including participating in several conference calls with FRBNY staff and with AIG officials. I also participated in the Board's September 16th meeting at which the loan to AIG was authorized. I received or sent several of the email communications and documents discussed below that are subject to plaintiffs FOIA request, as shown on the face of the documents, and, in connection with preparing this declaration, have also reviewed other relevant documents that I did not personally send or receive. The Vaughn Index Documents 14. As a result of my participation in the Board's analytical and decision-making process and my review of the responsive documents, I am familiar with the information the Board considered in reaching the September 16,2008 decision regarding lending to AIG, and the information Board staff considered in providing advice to the Board regarding that decision. This includes: (i) the information contained in the emails, attachments, and memos between Board staff, FRBNY staff, and staffs of other Federal Reserve Banks described in ~ ~ 15-17 below; (ii) the draft and final memos from Board staff to the Board or more senior Board staff members described in ~ ~ 18-19 below; and (iii) information contained in the emails and attachments among Board members and Board staff described in ~ 20 below. It also includes communications between Board members and staff and staff of other agencies, in particular, the Treasury, and a firm hired as a consultant to the Treasury, described in" 21 below. The documents described below all were related to the process of deliberation leading up to the Board's September 16, 2008 decision to authorize the FRBNY to extend a loan to AIG. 6 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 6 of 14Pre-decisional, Deliberative Communications with the FRBNYand Other FRBs 15. Among the communications that played a part in the Board's decision-making process were emails and attachments between Board staff and FRBNY staff. These staff-to-staff communications are identified on the AIG Vaughn Index (FOIA 2010-251) (hereinafter "AIG Vaughn Index") as documents numbered 000092, 96, 98, 103, 104, 162, 164, 169170,262,289,292,294,300,303,377-78,384,385,432,442-445,461,462,555,669, 679, 726,878,915,939,945,946,955,960,965,967,968,982, 1075, 1079, and 11191134. All but one of these emails and attachments are dated between September 13,2008 and September 16, 2008, before the Board's decision. That document, email 001119-20, and attachments 001121-34, dated September 17, 2008, transmitted prior staff proposals and analyses underlying a summary document provided to FRBNY President Geithner on the morning of September 16,2008. Although FRBNY staff distributed the attachments before the Board's September 16, 2008 decision, the FRBNY staff member forwarded them to the Board on September 17, 2008 to ensure that all involved staff members had the same set of attachments. The opinions, information, and weighing of options conveyed in these emails were relevant to the process of deciding how the Board should address AIG's severe financial distress. For example, email 000096 provides FRBNY staffs summary of a September 13,2008 conference call among AIG, Board, and FRBNY staff. In the email, FRBNY staff provides its candid assessment of information presented by AIG during the conference call. By way of further example, in email 000169-170, an FRBNY staff member provides her impressions of AIG' s request for advice on how to inform the Treasury of its funding situation, and ofthe New York State Insurance Department's ("NYSID's") plans with respect to AIG. Document 000375 is an 7 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 7 of 14attachment to an email from FRB Richmond summarizing a conference call among supervisory staff at a number ofFRBs, including FRBNY, exchangIng preliminary views on whether an AIG bankruptcy would raise systemic risk issues and possible strategies in addressing AIG's severe financial distress. Document 000442-445 is a Board staff member's notes on a conference call with NYSID regulators regarding AIG, circulated to more senior Board staff and FRBNY staff, containing the staff member's recounting of information provided by AIG and reflecting the staff member's views regarding that information. Because of the frank and unvarnished views exchanged in these emails, and the preliminary nature of many of the opinions expressed, disclosure would inhibit the candid exchange of information between Board and FRBNY staff that is critical to the Board's decision-making process. 16. An additional group of communications that factored into the Board's decision-making process were emails among Board members, Board staff, and FRBNY President Geithner. These documents are identified on the AIG Vaughn Index as documents numbered 000072, 78, 127, 135,412,447,518, and 885-88. In these pre-decisional communications, individual members of the Board, Board staff, and President Geithner discuss their preliminary reactions to AIG's liquidity crisis, possible responses to AIG's funding shortfall, and the pros and cons of various options. For example, document 000135 is an email from then-Vice Chairman Kohn to Chairman Bernanke, Governor Warsh and President Geithner, and General Counsel Scott Alvarez's response, reacting to information Board members had received regarding AIG's liquidity situation and discussing issues raised by AIG's proposals. Document 000412 is an email from Vice Chairman Kohn to President Geithner discussing pros and cons oflending to AIG. 8 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 8 of 14Communications such as these were an important part ofthe decision-making process because they allowed individual Board members, President Geithner, and staff to exchange preliminary views on issues of concern in advance of a formal Board meeting and vote. Because it is essential for individual Board members to be able candidly to discuss their views in advance of a decision without concern that the communications will be made public, disclosure of these emails would have a chilling effect on the decision-making process. 17. Finally, staff of the FRBNY provided Board staff with a number of emails attaching draft memoranda and analyses regarding risks posed by a possible AIG bankruptcy and the pros and cons oflending to AIG. These pre-decisional emails and attachments, identified on the AIG Vaughn Index as documents numbered 000130-134, 262-265,377-380 and 402-410, were relevant to the Board's overall decision-making process. For example, document 000130-134 is an attachment to a September 13,2008 email from an FRBNY staff member to a Board staff member in the Division of Research and Statistics (HR&S") who was involved in assessing the severity of AIG's financial distress and in formulating views regarding a possible loan to AIG. The document presents the FRBNY staff member's preliminary analysis and charts he prepared depicting risks posed to the financial system of a possible AIG bankruptcy. Documents 000402-410 are attachments to a September 14, 2008 email forwarded by President Geithner to Chairman Bernanke and Vice Chairman Kohn, with copies to other FRBNY staff members. Included among the attachments is a staff memorandum presenting the views of FRBNY staff on the pros and cons of lending to AIG, a spreadsheet provided by AIG detailing the staffs estimates of the amounts firms stood to lose in the event of an AIG bankruptcy, and FRBNY staff 9 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 9 of 14commentary on a Power Point presentation based on publicly available information regarding AIG subsidiaries. The cover email, which was provided to plaintiff, expresses FRBNY staffs views on the "relevant column" ofthe spreadsheet. These preliminary opinions and analyses of FRBNY staff members were taken into account by the Board and Board staff in considering the possible effects on other financial institutions and the financial system of an AIG bankruptcy, and played a part in the Board's decision-making process. Disclosure would chill the candid exchange of ideas that is central to the Board's decision-making process. Pre-Decisional, Draft and Final Memoranda 18. As part of the Board's process of deciding whether to authorize the FRBNY to extend a loan to AIG, Board staff in the Divisions of Monetary Affairs ("MA"), R&S, Bank Supervision and Regulation ("BS&R"), and the Legal Division began drafting a memo to the Board outlining various issues relating to AIG's liquidity problems. Various drafts of this memo, as well as excerpts from and comments on the draft, were circulated among Board staff and Board members between September 13, 2008 and September 15, 2008. These drafts, excerpts, and comments are listed in the AI G Vaughn Index as documents numbered 000087-90, 102, 109-110, 140-146, 172-180, 182-189,253-260,302,306-317, 321-331,336-346,360-368,387-398,416-423, 467-475, 478-489, 498-509, 703-715, 752-764, 778-789. Among the issues discussed in the draft memo were Board staff s assessment of AIG's solvency, possible spillover effects on financial firms and markets of an AIG bankruptcy, incremental benefits of lending to ArG, and possible consequences of not lending to AIG. This draft memo was never put into final form for the Board, and the process of circulating and commenting on the draft informed staffs 10 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 10 of 14thinking regarding the unfolding AIG liquidity crisis in preparation for an anticipated Board decision with regard to emergency lending to AIG. Some of the drafts are redlined, showing in detail portions that were stricken and new materials that were added, revealing in detail the evolution of Board staffs recommendations to the Board. It is my opinion that disclosure of these pre-decisional drafts would inhibit the frank exchange of ideas among members ofthe Board's staff to the detriment of the Board's decisionmaking process. 19. In addition to the draft memo described in ~ 18 above, the Board's Division of Research and Statistics ("R&S") prepared a shorter memo, which was provided to the Board members before the September 16, 2008 meeting. That memo provided Board members with staffs analysis of current conditions in the commercial paper markets and contains staffs view of AIG's recent experience in the commercial paper market. Drafts of the R&S memo circulated before the Board meeting on September 16,2008 are listed in the AIG Vaughn Index as documents numbered 000893,898-899,911-912,929-931,970971,973-974. The final R&S memo sent to Board members on September 16, 2008, is identified on the AIG Vaughn Index as document 001086-1093. In addition, staff in the Board's Public Affairs Office prepared draft public statements for Chairman Bemanke describing the background and rationale for the Board's decision to lend to AIG, which are identified in the AI G Vaughn Index as documents 001112 and 001116. Finally, staff in the Board's Division of Monetary Affairs drafted a memo for the division director, dated September 13,2008, identified in the AIG Vaughn Index as document number 000056-61, which provided staffs analysis of AIG's operations and current difficulties. This draft memo was for the division director's use in advising the Board on AIG-related 11 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 11 of 14matters. These drafts played a part in the Board's ongoing process, between September 13 and September 16,2008, of weighing options and, ultimately, deciding to authorize the FRBNY to extend a loan to AIG. Because the drafts map staffs editing process, and the final memos contain staffs candid views relating to AIG, disclosure would have a chilling effect on communications among Board staff and the Board that are vital to the decision-making process. Intra Agency Communications Among Board Members and Board Staff 20. In the days leading up to the Board's September 16,2008 decision to authorize the AIG loan, Board members were in frequent communication with Board staffto obtain information, monitor developments, and discuss possible responses to AIG's unfolding liquidity crisis. Given the rapid pace of events, there was often no time for formal meetings. Rather, Board members and staff exchanged views and discussed options through a number of channels, including emails. The following documents on the AIG Vaughn Index are emails dated between September 13,2008 and September 16, 2008 among individual members ofthe Board exchanging infonnation and preliminary views on how the Board might respond to AIG's liquidity problems: 000083, 121 and 871. The AIG Vaughn Index also identities a number of emails among individual Board members and Board staff dated September 15 and 16,2008 discussing strategies regarding AIG and procedures for the upcoming Board meeting. These emails are numbered: 000495, 752,848,854,855-860,869,885-888,900-901, 1095-1096. Finally, the AIG Vaughn Index identifies a number of emails dated September 13, 2008 through September 16, 2008 among members of the Board's staff. These pre-decisional emails among Board staff discuss the staffs views on developments, issues, risks, strategies, and pros and 12 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 12 of 14cons oflending to AIG, and helped inform staffs discussions with the Board regarding AIG. Theseemailsarenumbered: 000115-116,135,136,139,140,166,171,203,261, 286,318,411,466-467,625,667,678, 748, 749, 778, 790, 863, 884, 929 and 1110. The emails discussed above allowed Board members and staff to exchange preliminary views and information regarding rapidly unfolding events and to discuss possible advantages and pitfalls of various courses of action. Disclosure of communications such as these would chill candid discussions among Board members and staff that are essential to the Board's decision-making process. Inter-Agency Communications with Treasury 21. Finally, in addition to the communications described above, Board staff, Board members, and FRBNY President Geithner communicated with staff at the Treasury concerning the Treasury's views on possible financial assistance to AIG. These inter-agency communications are identified on the AIG Vaughn Index as documents numbered: 000865-866,891,895,903,904,909,918-924,979-980,981,984,989,1094,11041108, 1109 and 1113. These communications were relevant to the Board's decision on whether and how to lend to AIG. For example, document 000865-866 is an email from Treasury General Counsel Robert Hoyt to a number of Treasury officials, FRBNY President Geithner, and General Counsel Scott Alvarez outlining a number of Treasury staffs views on options regarding the use of existing agency authority to address AIG's liquidity crisis. Several of the emails that followed comment on these options. Document 000918-924 was a draft legislative proposal crafted for consideration as a response to AIG's funding crisis prepared by a Board Assistant General Counsel and circulated to the Board's General Counsel and a Treasury officiaL Documents 00097913 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 13 of 14980,981,984,989 and 1094 were emails between the Board's General Counsel and a Treasury official following up on this proposal. Documents 0001104-1108 and 1109 are attachments to a September 16, 2008 email from Robert Scully, of Morgan Stanley, to Governor Warsh forwarding an email and attachments from Morgan Stanley analyzing the implications of an AIG bankruptcy and providing a "To Do" list of suggested actions and a timetable. Treasury had retained Morgan Stanley as a contractor and paid consultant to provide information related to financial stability issues, as noted on the face of the first attachment. These inter-agency communications with Treasury were among the many sources of information and opinions upon which Board and Board staff members drew in the hours leading up to the Board's decision to authorize the loan to AIG. Disclosure of these inter-agency communications would chill the candor of discussions among officials of various agencies that are vital to the Board's decision-making process. I declare under penalty of perjury that the foregoing is true and correct. Executed in the city of Washington, D.C. on this ~ l A a a y of June, 2011. 14 Case 1:10-cv-00751-ABJ Document 13-11 Filed 06/08/11 Page 14 of 14Case 1:10-cv-00751-ABJ Document 13-1 Filed 06/08/11 Page 1 of 1UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) ) VERN McKINLEY, ) ) ) Plaintiff, ) ) v. ) Civil Action No.1: 1O-cv-00751 (ABJ) ) ) BOARD OF GOVERNORS OF ) THE FEDERAL RESERVE ) SYSTEM, ) Defendant. ) DECLARATION OF ALISON M. THRO I, Alison M. Thro, declare as follows: BACKGROUND 1. I am a Senior Counsel in the Legal Division ofthe Board of Governors of the Federal Reserve System ("Board"), and have been employed as an attorney at the Board since March 31, 1998. Since 2004, I have been the most senior attorney in the Board's Legal Division responsible for reviewing FOIA requests. My primary responsibilities include supervising the processing of requests for information received under FOIA, and providing legal advice on issues related to FOIA, including the applicability ofthe FOIA exemptions. As a result of my extensive involvement in processing FOIA requests for the Board, I am: (l) familiar with the types of records maintained by the Board and the places in which and persons by whom records are maintained; (2) experienced in 1 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 1 of 247searching the variety of records that are kept by the Board in response to a FOIA request; (3) familiar with the FOIA, its requirements for and the exemptions from disclosure; and (4) experienced in judging whether documents are responsive and should be produced in full, redacted, or withheld in their entirety. I was responsible for processing requests under the Freedom of Information Act, 5 U.S.C. 552 (the "Act" or "FOIA") made by Vern McKinley ("plaintiff') to the Board bye-mail dated March 21, 2010 (the "AIG Request") and March 28,2010 (the "Lehman Request") that are at issue in this case. Accordingly, I have personal knowledge ofthe facts herein. 2. When a request is made under FOIA for information that is not "published information and records" as described in 12 C.F.R. 261.10 and .11, and that has not been previously cleared for release to the public, it has been the Board's practice to assign such requests to the Legal Division for review and processing. In general, when such a FOIA request is made, the Board's FOIA Office makes a preliminary review of the request and assembles any responsive documents under its control. The FOIA Office then sends the request to the Legal Division for processing. The Legal Division contacts other divisions that may have responsive documents. When appropriate, the Legal Division also contacts relevant Federal Reserve Bank staff to determine if they have responsive Board records subject to FOIA. As part of my responsibilities for processing FOIA requests, I, or Legal Division staff members or contract attorneys working under my direction, review the responsive materials and identifY any documents or portions of documents that are exempt from disclosure under any of the exemptions in the FOIA. We then draft a responsive letter for the Board's Office of the Secretary responding to the FOrA request and identifYing any exemptions that may apply to the requested information. 2 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 2 of 247PROCESSING OF THE AIG REQUEST 3. The AIG Request sought further detail on information contained on p. 3 of the following minutes of the Board of Governors of the Federal Reserve dated September 16, 2008: http://www.federalreserve.gov/newsevents/press/monetary/monetary20090311 a 1. pdf The source of the power referenced in the minutes is Section 13(3) of the Federal Reserve Act. In particular, I am requesting any and all communications and records concerning or relating to the Board's decision that detail that 'the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility' as described in the meeting minutes." A true and correct copy of the AIG Request, dated March 21, 2010, is attached hereto as Exhibit A. 4. By letter dated March 22, 2010, the Manager of the Freedom of Information Office at the Board ("FOI Office") acknowledged receipt ofthe AIG Request and granted the plaintiffs request for a fee waiver. A true and correct copy of the March 22, 2010 letter is attached hereto as Exhibit B. 5. By letter dated April 19, 2010, the Manager ofthe FOI Office informed the plaintiff that the Board was extending the period for the Board's response to the AIG Request until May 3, 2010 pursuant to section (a)(6)(B)(i) ofthe FOIA in order to consult with another agency or with two or more components of the Board. A true and correct copy of the April 19, 2010 letter is attached hereto as Exhibit C. 6. By letter dated November 9, 2010, following the search and identification process discussed below in paragraphs 15-26, the Secretary of the Board informed the plaintiff that staffhad searched Board records, and had found a large number of documents responsive to the AIG Request. The letter informed the plaintiffthat information being released to him showed that staff: monitored the rapid liquidity drain on AIG; gathered 3 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 3 of 247intelligence on AIG and its structure, counterparty exposures, and market risk positioning from public and internal sources and from discussions with other regulators; evaluated AIG's solvency and liquidity and collateral valuations; and monitored a variety of other subjects detailed in the letter. The letter informed the plaintiff that the Secretary had determined that the remaining documents contained exempt information subject to withholding under authority of Exemptions 4,5,6, and 8 of the Act, respectively 5 u.S.c. 552(b)(4), (b)(5), (b)(6), and (b)(8). The Secretary authorized disclosure of all reasonably segregable non-exempt information to the plaintiff. The letter informed plaintiff that his request was granted in part and denied in part, and that he was not required to exhaust administrative remedies, but had the right to do so. By letter dated May 27, 2011 to the plaintiff, the Associate Secretary of the Board authorized the release of one additional page which had previously been withheld in part. Of 1134 total pages provided to the plaintiff, 246 pages were provided in full, 339 pages were provided in part, and 549 pages were withheld in full. The pages provided to the plaintiff bore bates numbers beginning with the prefix "BOG-FOIA 10-251" (a reference to the Board's internal processing number, 2010-251, assigned to the AIG Request) and running from 000001 through 001134. A true and correct copy of the November 9,2010 letter (without enclosure) is attached hereto as Exhibit D. PROCESSING OF THE LEHMAN REQUEST 7. The Lehman Request sought any and all communications and records regarding analysis undertaken regarding Lehman Brothers and the assessment in September 2008 or earlier of what 'contagion' might have flowed from Lehman Brothers' filing of bankruptcy as the word contagion was used in the case of the Board of Governors' deliberations over Bear Steams: http://www.federalreserve. gov Inewsevents/press/ other/other 20080627al.pdf or 'systemic effect on financial markets' that may have flowed 4 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 4 of 247from a Lehman bankruptcy as the phrase was used in the Board of Governors' deliberations over American International Group (page 3): http://w\\-w.federalreserve.gov !newsevents!press!monetary!monetary20090311 a 1. pdf. The analysis would likely have been undertaken in the context of considering whether to take action under Section 13(3) of the Federal Reserve Act to avoid a Lehman bankruptcy. A true and correct copy of the Lehman Request, dated March 28, 2010, is attached hereto as Exhibit E. 8. By letter dated March 30,2010, the Manager ofthe FO! Office acknowledged receipt of the Lehman Request and confirmed the Board's assumption that plaintiff would pay all fees incurred in the processing ofthe Lehman Request, up to $200. A true and correct copy of the March 30, 2010 letter is attached hereto as Exhibit F. 9. By letter dated April 26, 2010, the Manager ofthe FOI Office informed the plaintiff that the Board was extending the period for the Board's response to the AIG Request until May 10,2010 pursuant to section (a)(6)(B)(i) of the FOIA in order to consult with another agency or with two or more components of the Board. A true and correct copy of the April 26, 2010 letter is attached hereto as Exhibit G. 10. By letter dated November 9, 2010, following the search and identification process discussed below in paragraphs 15-26 below, the Secretary ofthe Board informed the plaintiff that staff had searched Board records, and had found a large volume of information responsive to the Lehman Request. The letter informed the plaintiff that information being released to him showed that staff systematically monitored the potential impact of Lehman's declining financial condition on the trip arty repo, OTe derivatives, and commercial paper markets and large financial institutions in the days preceding Lehman's bankruptcy, and a variety of other subjects detailed in the letter. The letter informed the plaintiff that the Secretary had determined that the remaining 5 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 5 of 247documents contained exempt information subject to withholding under authority of Exemptions 2,4,5,6, and 8 of the Act, respectively 5 U.S.C. 552(b)(2), (b)(4), (b)(5), (b)( 6), and (b )(8). The Secretary authorized disclosure of all reasonably segregable nonexempt information to the plaintiff. The letter informed plaintiff that his request was granted in part and denied in part, and that he was not required to exhaust administrative remedies, but had the right to do so. By letter dated May 27, 2011 to the plaintiff, the Associate Secretary of the Board authorized the release of an additional 33 pages which had previously been withheld in part or in full. Of 1254 total pages provided to the plaintiff, 329 pages were provided in full, 412 pages were provided in part, and 513 pages were withheld in full. The pages provided to the plaintiff bore bates numbers beginning with the prefix "BOG-FOIA 1 0-267" (a reference to the Board's internal processing number, 2010-267, assigned to the Lehman Request) and running from 000001 through 001254. A true and correct copy ofthe November 9,2010 letter (without enclosure) is attached hereto as Exhibit H. Adding together the numbers for the AIG Request and the Lehman Request, of2388 total pages provided to plaintiff, 575 pages were provided in full, 751 pages were provided in part, and 1062 pages were withheld in full. THE PROJECT COLLECT DATABASES 11. As part of my duties in connection with FOIA, I was aware that on September 16, 2008, the Board had authorized the Federal Reserve Bank of New York ("FRBNY") to extend a loan to AIG (the "AIG Loan"). The decision to authorize the AIG Loan was in response to information that began to emerge on or around September 12, 2008, that AIG was experiencing severe liquidity problems and might have to declare bankruptcy in the near term. As part of my duties in connection with FOIA, I was also aware that, beginning in 6 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 6 of 247March 2008, Lehman Brothers, along with other primary dealers, had access to Federal Reserve emergency funding at the Primary Dealer Credit Facility ("PDCF"). I was aware that throughout the summer of 2008, Lehman experienced worsening capital and liquidity shortfalls and that, over the weekend of September 13-15, 2008, the FRBNY, Board, U.S. Department ofthe Treasury ("Treasury"), and Securities and Exchange Commission ("SEC") brought together leaders of m ~ i o r financial firms at the FRBNY in an attempt to craft a private sector solution. No solution could be crafted and Lehman Brothers declared bankruptcy on September 15,2008. 12. Because ofthe public interest in the AIG Loan and Lehman Brothers' bankruptcy, the Board received an unprecedented number of requests for information regarding these events from, among others, members of Congress and FOIA requesters. In response, the General Counsel directed Legal Division staff to gather all material relating to the AIG Loan and the Lehman Brothers bankruptcy, among other topics, as part of a larger effort to collect documents relating to the Federal Reserve's response to the financial crisis, known as Project Collect. I had overall responsibility for Project Collect. Project Collect involved the creation of two repositories of documents, one consisting of emails and the other consisting of electronic documents (native born and converted). The collection initiative was designed to gather in these two repositories all Board documents that could be responsive to a large number of broad requests for information relating to the Board's response to the financial crisis. Some of those requests, like the plaintiff's, sought information regarding the Board's decision that the disorderly failure of AIG could have a systemic effects on the financial markets and information regarding the Board's 7 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 7 of 247analysis that systemic effects on financial markets may have flowed from a Lehman Brothers bankruptcy. 13. As ofthe time ofthe AIG Loan and the Lehman Brothers bankruptcy searches described in paragraphs 15-26 below, the Project Collect databases contained Board records from August 2007 through May 2009 and beyond relating to the Federal Reserve's response to the financial crisis, including the AIG Loan and the Lehman Brothers bankruptcy. In creating the Project Collect databases, I worked with other staff in the Legal Division, the Office of the Secretary of the Board (the custodian of Board records), and the Division of Information Technology. We contacted approximately 300 Board members, officers, and staff to determine ifthey had, or were aware of, responsive information. Based on these discussions, we initially collected documents from approximately 170 Board members, officers, and staff. As a result of subsequent collections, we obtained documents from a total of approximately 190-200 Board members, officers, and staff in nine divisions (Monetary Affairs, Reserve Bank Operations and Payment Systems, Office of Board Members, Office of the Secretary, Legal, International Finance, Banking Supervision and Regulation, Research and Statistics, and Consumer and Community Affairs) who were involved in any aspect of the Board's response to the financial crisis. Among other topics, we contacted those involved in the response to Lehman Brothers' capital and liquidity crisis as well as those involved in the response to AIG's liquidity crisis and request for the AIG Loan. In particular, we sought all documents relating to AIG from January 1,2008 through the date of the collection and all documents relating to Lehman Brothers from January 1,2008 through the date ofthe collection. We identified staff members involved in the Lehman and AIG matters by starting with a core group of staff 8 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 8 of 247involved in these matters and asking them, and subsequent interviewees, to identify any other Board staff who might have responsive documents. As a result, I was satisfied that we had identified all Board and Board staff members who were likely to have documents relating to the AIG Loan and the Lehman Brothers bankruptcy. We held meetings with some of the staff members and contacted others by telephone and email. We described the FOIA and Congressional requests the Board had received, including requests for information relating to the AIG Loan and the Lehman Brothers bankruptcy, discussed the staff members' specific roles in the Board's actions, and asked the staff members to forward any potentially responsive documents for inclusion in the Project Collect databases. We considered our search to be broad enough to capture all Board documents responsive to any FOIA or other request for information relating to the Board's response to the financial crisis, including requests for information about the AIG Loan or the Lehman Brothers bankruptcy. 14. In response to our contacts with the approximately 300 Board members, officers and staff and collection of documents from approximately 170 of them between May and June 2009, the Legal Division received nearly 700,000 emails and approximately 105,000 electronic documents for inclusion in the Project Collect databases. It is my belief that any Board record subject to FOIA responsive to the AIG Request and the Lehman Request would be contained in the Project Collect databases. In conducting searches in response to the AIG and Lehman Requests, IT staff created "spoke" databases containing all e-mails and electronic documents relating to the AIG Loan and Lehman bankruptcy, respectively. We searched in the spoke databases to identify responsive documents subject to FOIA, rather than in the master databases, because they were faster to search 9 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 9 of 247than the full Project Collect databases, while still containing all documents relevant or responsive to a particular request. THE SEARCH FOR DOCUMENTS RESPONSIVE TO THE AIG REQUEST 15. In response to a very broad request by another entity for documents relating to the AIG Loan and other AIG-related topics, beginning in February 2010 and continuing for several months, contract attorneys working for the Board searched the AIG spoke databases to identify a core set of emails and electronic materials documenting the Board's response to the crisis at AIG and decision to authorize FRBNY to provide financial assistance, including the AIG Loan, to the company. In my view, this search was broad enough to encompass all documents subject to FOIA potentially responsive to the AIG Request. At my direction, one of the contract attorneys conducted a chronological search of documents identified in this earlier search, focusing on materials from September 2008, to identify a core subset of materials responsive to the AIG Request. 16. Beginning in September 2010 and continuing through early November 2010, when this search was completed, I personally reviewed the core subset of emails and electronic documents for completeness, responsiveness to the AIG Request, and exempt information. I conducted a chronological review of all AIG emails from September 2008. I personally reviewed each memo, email, email attachment, or document multiple times to determine ifit contained information subject to FOIA responsive to plaintiff's request for "any and all communications and records concerning or relating to the Board's decision" that the '''disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility.'" I 10 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 10 of 247identified and eliminated a large volume of duplicate materials. Where documents, memos or emails referenced other potentially responsive infonnation, I confirmed that the information was included in the spoke databases. Using this process, I believe that I captured the widest possible range of information subject to FOIA responsive to the AIG Request. 17. From my preliminary email and document reviews, it became evident that materials underlying the Board's ultimate September 16,2008 decision to make the AIG Loan fell approximately within the Sept. 12 through Sept. 17,2008 date range. Accordingly, after preliminary reviews of emails falling within a broader date range, I focused subsequent chronological searches and reviews on the September 12-17,2008, timeframe. It became evident that some ofthe matters Board members, officers, and staff considered in the days leading up to authorization of the AIG Loan were: AIG's liquidity situation; its structure, counterparty exposure, market risk positioning; AIG's solvency and liquidity and collateral valuations; exposure oflarge financial institutions to AIG; AIG's participation in the commercial paper markets and payment and settlement systems; pros and cons oflending to AIG and alternatives to a loan; and systemic risks posed by an AIG bankruptcy. 18. After identifYing a core set of responsive, nonduplicative emails and documents, I reviewed the materials for potentially exempt information. Each page was carefully reviewed, and the redactions I made were highly circumscribed. In many instances, the redactions amount to no more than a few words, such as the identity of a financial institution or a few phrases. Pages were withheld in full only when they contained no reasonably segregable nonexempt material. The exemption claimed is noted on the 11 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 11 of 247documents provided to the plaintiff using designators such as "(b)(4)" or "(b)(5)" over the redactions. The term "duplicate" appears where duplicate material was redacted. These responsive documents, as redacted, were provided to the plaintiff as set forth in paragraph 6 above. 19. In connection with this litigation, I worked with other members ofthe Board's Legal Division and a contract attorney to create the AIG Vaughn Index, attached to this declaration as Exhibit 1. The AIG Vaughn Index accurately identifies each document or portion of a document withheld from the plaintiff on the basis of a FOIA exemption by bates number and by written description; describes the document or portion withheld; explains the basis for the claimed exemption; and states whether the pages described were withheld in full or redacted. For a small number of documents, additional or different exemptions are claimed on the AIG Vaughn Index than listed on the document provided to the plaintiff. In those few cases, the Vaughn Index reflects our final claim of exemption with respect to those documents. The AIG Vaughn Index notes where duplicate documents were provided to the plaintiff but inadvertently not marked as duplicates. The Board's claim of exemption for these inadvertent duplicates is the same as for the original document. THE SEARCH FOR DOCUMENTS RESPONSIVE TO THE LEHMAN REQUEST 20. As described in paragraphs 11-14 above, documents potentially responsive to the Lehman Request were collected from May to June 2009 and stored in the Project Collect email and electronic document databases. Because the Project Collect databases broadly captured any Board record relating to Lehman Brothers from January 1,2008 through the date of the collection in June 2009, I believed that any document subject to FOIA 12 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 12 of 247potentially responsive to the Lehman Request would be stored in those databases. In February 2010, all emails and documents in the Project Collect databases related to Lehman were segregated into "spoke" databases for ease of review. 21. Beginning in February 2010 and continuing for several months, contract attorneys working for the Board searched the Lehman spoke databases to identify a core set of emails and electronic materials documenting financial difficulties at Lehman and the internal agency deliberations that preceded and coincided with the company's decision in September 2008 to declare bankruptcy. In my view, this search was broad enough to encompass all documents subject to FOIA potentially responsive to the Lehman Request. 22. Beginning in August 2010, at my direction and under my supervision, a contract attorney described in paragraph 15 above who performed a preliminary search for responsive AIG documents conducted a first level review of the core set of Lehman emails for responsiveness to the Lehman Request. The attorney concentrated her search on emails from September 2008. I personally reviewed the results of this preliminary search and determined that most ofthe documents uncovered were focused on the FRBNY's review and analysis ofthe possible effects of a Lehman bankruptcy. Based on my experience with prior FOIA searches, I believed that the Board potentially had additional responsive documents regarding "the analysis undertaken regarding 'Lehman Brothers' and the assessment in September 2008 or earlier of what 'contagion' or 'systemic effect on financial markets' may have flowed from a Lehman Brothers bankruptcy filing. Accordingly, I asked another contract attorney to conduct two expanded searches covering the time period March 1 - September 15,2008. As a result of these searches, the attorneys identified a core subset of materials responsive to the Lehman Request. 13 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 13 of 24723. I reviewed the core subset of responsive materials for completeness, responsiveness to the Lehman Request, and exempt information. In conducting this review, I specifically focused on emails and documents relating to the contagion effects or risks to the financial system that may be posed by a Lehman Brothers bankruptcy. 24. I first conducted a chronological review of all Lehman emails identified above from March through September 2008. I personally reviewed each email and email attachment multiple times to determine if it contained information responsive to the Lehman Request. I identified and eliminated a large volume of duplicate materials. Where documents or emails referenced other potentially responsive information, I confirmed that the information was included in the spoke databases and personally reviewed it for responsiveness. Using this process, I believe that I captured the widest possible range of information subject to FOIA responsive to the Lehman Request. As described more fully in the Secretary's November 9,2010 letter attached as Exhibit H, responsive materials consisted primarily of emails and attachments to emails, including spreadsheets, which documented the unfolding analysis of Board and FRBNY staff of the effects of a Lehman Brothers bankruptcy on the triparty repo, over-the-counter derivatives and commercial paper markets and clearance and settlement systems, as well as efforts to contain the risks, to facilitate a solution to Lehman's worsening capital and liquidity situation, and to ensure effective and timely communications with domestic and international supervisors. 25. I reviewed the responsive documents for potentially exempt information. Each page was carefully reviewed, and the redactions I made were highly circumscribed. In many instances, the redactions amount to no more than a few words, such as the identity of a financial institution or a few phrases. Pages were withheld in full only when they 14 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 14 of 247contained no reasonably segregable nonexempt material. The exemption claimed is noted on the documents provided to the plaintiff using designators such as "(b)( 4)" or "(b)(5)" over the redactions. The term "duplicate" appears where duplicate material was redacted. These responsive documents, as redacted, were provided to the plaintiff as set forth in paragraph 1 0 above. 26. In connection with this litigation, I worked with other members of the Board's Legal Division and a contract attorney to create the Lehman Vaughn Index, attached to this declaration as Exhibit J. The Lehman Vaughn Index accurately identifies each document or portion of a document withheld from the plaintiff on the basis of a FOIA exemption by bates number and by written description; describes the document or portion withheld; explains the basis for the claimed exemption; and states whether the pages described were withheld in full or redacted. For a small number of documents, additional or different exemptions are claimed on the Lehman Vaughn Index than listed on the document provided to the plaintiff. In those few cases, the Vaughn Index reflects our final claim of exemption with respect to those documents. The Lehman Vaughn Index notes where duplicate documents were provided to the plaintiff but inadvertently not marked as duplicates. The Board's claim of exemption for these inadvertent duplicates is the same as for the original document. Finally, the Lehman Vaughn Index notes one instance in which portions of a withheld document (bates # 000634-668) are nonresponsive, but inadvertently not marked as non-responsive. The Lehman Vaughn Index reflects our final determination of non-responsiveness with respect to this document. 15 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 15 of 247THE VAUGHN INDEX DOCUMENTS Exemption 4 - Documents Purchased or Obtained Voluntarily from Third Party Providers under Confidentiality Agreements 27. Among the documents identified in the searches described in paragraphs 15-26 above are copyrighted research reports or analyses purchased by Board or Federal Reserve Bank ("FRB") staff from third party providers such as Moody's Investor Service, Merrill Lynch, Citigroup Global Markets Equity Research, Morgan Stanley Research and RBC Capital Markets under contracts or license agreements that require Board and FRB staff to maintain their confidentiality. These confidential research reports and analyses are identified on the AI G Vaughn Index as document numbers 000034-39, 40-42, 151-161, 191-2001,276-285,949-954,995-1003, 1004-1009, 1010-1018, 1047-1052, 1104-1108, 1109. In addition, two copyrighted research reports are indentified on the Lehman Vaughn Index as document numbers 406-07 and 408-414. Finally, document 1086-1093 on the AIG Vaughn Index contains data regarding the U.S. commercial paper market that the Board obtained on a voluntary basis from Depository Trust & Clearing Corp. (DTCC) on the understanding that it would be kept confidential. I reviewed these documents in conducting the searches described in paragraphs 15-26 above and am familiar with their contents. I have reviewed many similar research reports, analyses and data in conducting other FOIA searches. Each of these documents contains research and analysis regarding AIG's or Lehman Brothers' assets, income, earnings, cashflow, revenue and related topics, or data regarding the U.S. commercial paper market. Accordingly, I concluded that each of these documents is commercial or financial in nature, within the meaning of FOIA Exemption 4, and that the third party providers described above are persons under Exemption 4. The Board and the FRBs voluntarily entered into contracts, license 16 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 16 of 247agreements or other agreements with each of these third party providers to provide research, analysis or data requested by Board or FRB staff, usually in exchange for a fee. These third party providers will provide similar research, analysis and data to other clients for a fee, and no U.S. law or regulation requires them to provide this information to the Board or FRBs. The terms of the Board's and FRBs' contracts, license agreements, or other agreements with each of these entities requires that the Board or FRB maintain confidentiality of these research reports, analyses, or data and forbid further dissemination or publication ofthese reports by Board or FRB staff. In many cases, these contractual agreements not to disclose appear on the face ofthe research report. For example, the Moody's Investor Service report listed as document 000034-39 of the AIG Vaughn Index provides "none of such information may be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any such purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person without Moody's prior written consent." The Merrill Lynch report listed as document 000152-161 on the AIG Vaughn Index provides "[r]eceipt and review of this research report constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion or information contained in this report (including any investment recommendations, estimates or price targets) prior to Merrill Lynch's public disclosure of such information." The Citigroup Global Markets Equity Research report listed as document 000995-1003 on the AIG Vaughn Index provides "[a]ny unauthorized use, duplication, redistribution or disclosure is prohibited by law and will result in prosecution." As a result of these and similar contractual clauses, and the fact that subscribers must pay a fee 17 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 17 of 247for these reports, I concluded that these third party providers do not customarily disclose the information in these reports to the public. In addition, I am aware through discussions with high level Board staff members who obtained this data from DTCC that DTCC does not customarily disclose to the public data on the U.S. commercial paper market that it provided to the Board. In the alternative, because the Board and FRBs agree to maintain confidentiality when entering contracts with third party providers, because third party providers are not required by law or regulation to enter into contracts or license agreements with the Board or FRBs, and because clients would be less willing to pay fees for these research reports if they are routinely disseminated to the public through FOIA or otherwise, it is my view that public disclosure of these reports or data in connection with these FOIA Requests is likely to make third party providers less willing to enter contracts and license agreements to provide similar information to the Board and FRBs, thereby diminishing the Board's and FRBs' ability to obtain similar, necessary information in the future. Accordingly, I concluded that this information was exempt from disclosure under FOIA Exemption 4. Exemption 4 - Information Voluntarily Provided by Foreign Central Banks and Foreign Bank Supervisors and Confidential Market Sources 28. Documents numbered 000726, 756-757, 1012, 1081-82, 1117, and 1172 on the Lehman Vaughn Index, and documents 000648-650, 653, and 1084 on the AIG Vaughn Index, are emails among Board staff and Board members discussing information provided to the Board on a voluntary basis by foreign central banks, foreign bank supervisors and foreign exchange trading platforms regarding Lehman Brothers and AIG. I reviewed these documents in conducting the FOIA searches described in paragraphs 15-26 above, and have reviewed many similar documents in connection with my duties described in 18 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 18 of 247paragraphs 1 From my review of these documents, it appeared to me that the subject matter was commercial and financial in nature, relating to AIG's and Lehman's financial condition in countries abroad, or the implications of a potential Lehman or AIG bankruptcy on markets overseas For example, emails 000726 and 000756-757 on the Lehman Vaughn Index are emails among SEC and Board staff discussing information provided by UK bank supervisors regarding outflows of balances and liquidity impacts at Lehman's overseas affiliates. Email 001012 on the Lehman Vaughn Index, among a number of Board members and Board staff members, discusses a call in which foreign bank supervisors provided the Board with information regarding exposures of Lehman's major foreign subsidiaries. Email 001084 on the AIG Vaughn Index, marked "confidential" on the subject line and sent the day of the AIG Loan, conveys information from EBS regarding AIG's ability to trade foreign exchange on that UK-based foreign exchange trading platform. From my experience in FOIA matters, I am aware that foreign central banks, foreign bank supervisory agencies, foreign government officials, and other foreign entities are considered to be "persons" under FOIA. Finally, through my duties in connection with FOIA matters and my resultant discussions with Board members and staff who receive information from foreign bank supervisors, foreign central banks, foreign government officials, and other foreign entities, I am aware that these persons voluntarily provide information to the Board regarding the condition of entities such as AIG and Lehman, that no U.S. law or regulation requires them to provide this information, and that these persons provide this sensitive information to the Board on the understanding that it will be kept confidential, and that these persons do not customarily release this information to the public. For example, I considered the fact that 19 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 19 of 247email 001084 on the AIG Vaughn Index was marked "confidential," even though it was only circulated internally at the Board. Moreover, in light of the sensitivity of this information and these persons' understanding that the information will be kept confidential, it is my opinion that these persons would be much less willing to provide similar, sensitive information to the Board in the future if it was publicly disclosed. As a result, I concluded that this information was exempt under Exemption 4. 29. Documents numbered 000638,675,677,847,867-868,874-875,876-877 and 907 on the AIG Vaughn Index are e-mails from confidential sources in the private sector to Board members and staff providing real-time commercial and financial information regarding AIG. The information provided by these market sources, on the understanding that their identities would be kept confidential, assisted the Board and staff in determining the magnitude of AIG's liquidity problems and possible market effects of an AIG bankruptcy. While the information they provided has been disclosed to the plaintiff, information identifying these sources has been redacted from the emails under Exemptions 4 and 6. Through my duties under FOIA, I am aware that the identity of a trade source is considered commercial or financial under Exemption 4 where the source's commercial or financial interests could be harmed through disclosure of the fact that they provided information (market intelligence) regarding a client, competitor or market conditions to the government. In the case of the emails above, I concluded that the commercial or financial interests of the market sources could be harmed because of possible negative reaction of their clients or entities with whom they do business, and that their identities were commercial or financial in nature. For example, in email 000677, a confidential source reported "[l]iquidity was poor, [t]hink investor parking in Tbills and 20 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 20 of 247Treasuries, we only saw halfthe normal flows." In email 00874-875, a confidential source reported "The EFT market is being shut down by the AIG problems. The US senior bank debt market is collapsing due to the collapse in recovery rate assumptions as more failures are considered." Clients, competitors, or entities that do business with these sources might react negatively to their provision of this information to the Board, causing harm to their commercial interests. From my experience with FOIA matters, I am aware that these private sector individuals and entities are "persons" under FOIA. Through my duties under FOIA and resultant discussions with Board members and staff who receive this type of information, I am aware that these confidential market sources voluntarily provide market intelligence to Board staff under the understanding that their identities will be kept confidential, that no U.S. law or regulation requires them to provide this information, and that these persons do not customarily disclose to the public the fact that they have provided market intelligence to the Board. As a result, it is also my opinion that disclosure of the identities of these market sources will diminish the Board's ability to obtain similar information from market sources in the future. Exemption 5 - Documents that are Pre-Decisional and Deliberative and Protected by Attorney-Client Privilege 30. Documents numbered 000071, 135,625,857,858,965 and 967 on the AIG Vaughn Index are e-mails to or from the Board's General Counsel, Scott Alvarez, and Board members, Board staff members, or staff of the FRBNY, requesting or giving legal advice relating to AIG. Document 000071 is an e-mail in which Chairman Bernanke requests legal advice regarding a call to foreign central banks, and the General Counsel responds with legal advice. Document 000135 is an e-mail from the General Counsel to Governor Kohn, with copies to Chairman Bernanke, Governor Warsh, FRBNY President Geithner, 21 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 21 of 247and a Board staff member, discussing legal issues raised by an AIG plan to improve its liquidity position. Document 000625 is an e-mail from the General Counsel to a Board staff member suggesting an edit to a memorandum regarding AIG and providing the underlying legal reasoning. Document 000855 is an e-mail from a Board staff member to another Board staff member, with copies to Board members and the General Counsel, requesting legal advice. Document 000857 is an e-mail from a Board staff member responding to document 000855 and recounting legal advice he had just received by telephone from the General Counsel. Document 000858 is an e-mail from the Board's General Counsel to a Board staff member responding to the request for legal advice in document 855 above. Document 000965 is an e-mail from the General Counsel to FRBNY President Geithner and FRBNY General Counsel Thomas Baxter suggesting a change to a draft AIG resolution (document 000964). Document 000967 is an email from the Board's General Counsel to the FRBNY's General Counsel making a legal recommendation as a follow-up to document 000965 above. Because the FRBNY was acting as a consultant to the Board with regard to the Board's decision to authorize a loan to AIG, I considered both FRBNY president Geithner and the FRBNY's General Counsel to be within the attorney-client relationship with regard to these documents. Because these documents contain candid opinions and legal assessments that were part of the ongoing process of deliberation leading up to the Board's decision to authorize the FRBNY to make a loan to AIG, and sought and provided legal advice, I concluded that they were both pre-decisional and deliberative and protected by the attorney client privilege and were exempt under FOIA Exemption 5. 22 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 22 of 24731. Documents 000906, 941-943,957-959 and 964 on the AIG Vaughn Index are drafts ofa resolution for the Board regarding AIG and a draft memo for the Board regarding the legal authority to make an advance to a borrower under section 13(3) ofthe Federal Reserve Act. These drafts were prepared for the Board, and circulated among, its attorneys: General Counsel, Scott Alvarez; Deputy General Counsel Rich Ashton, and Board Legal Division Attorneys Mark VanDerWeide, Sophia Allison, Kieran Fallon and Stephanie Martin to assist the Board and provide legal advice in advance of its decision whether to authorize the FRBNY to extend credit to AIG. I concluded that these drafts were both pre-decisional and deliberative and protected by the attorney-client privilege and were exempt from disclosure under Exemption 5. 32. Document number 000039 on the Lehman Vaughn Index is a September 13, 2008 e-mail from Board General Counsel Scott Alvarez to a Board staff member providing legal analysis on the Treasury's preliminary contingency plans regarding Lehman Brothers and requesting the staff member's input. Because this communication contained the candid give and take between the Board's General Counsel and a Board staff member that formed a part ofthe Board's decision making process, and sought input and provided legal analysis within the attorney-client relationship, I concluded that it was both pre-decisional and deliberative and protected by the attorney client privilege and was exempt from disclosure under Exemption 5. Exemption 5 -Portions ofthe Board's Internal Contingency Survival Binder and Procedures for Convening an Emergency PRC Call 33. Document 000634-668 on the Lehman Vaughn Index is the Board's internal contingency survival binder. The binder summarizes actions Board and FRB staff could take to safeguard our Nation's financial system in response to a variety of crisis scenarios such 23 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 23 of 247as a terrorist attack or stock market crash. As noted on the Lehman Vaughn Index, in assisting in preparation of the Lehman Vaughn Index, I determined that only those portions of the manual (bates numbered 000649-650 and 665-668) relating to sudden insolvency of a major non-financial institution (that is, a non-Board or -banking agency regulated institution) such as Lehman Brothers are responsive to plaintiff's request for communications regarding what "contagion" or "systemic effect on financial markets" may have flowed from a Lehman Brothers bankruptcy. Responsive portions of the document list steps which could be taken, as well as a suggested timeline of actions and individuals to be contacted, in the event of such a crisis. By its nature, the binder is designed to assist staff in rapidly responding to various crisis scenarios that have not yet occurred. The binder was attached to a September 11, 2008 interagency e-mail (bates numbered 000633) among members ofFRBNY staff and SEC staff who were assisting the Board in responding to Lehman's capital and liquidity crisis. The email noted that the binder and another attachment provided "(g]ood stuff to think about." Because FRBNY and SEC staff considered the binder as part of the process of advising Board and Board staff members on possible responses to the Lehman crisis, I considered it to be both predecisional and deliberative and exempt from disclosure under FOIA Exemption 5. 34. Email 000959, and attachments 000960, 961-976 and 977-982, on the Lehman Vaughn Index, discuss procedures put in place by the Board and FRBNY to invoke an emergency conference call of the Payments Risk Committee (PRC) in response to a major disruption of U.S. payment and settlement operations. The PRC is composed ofrepresentatives of private sector financial institutions and organizations that participate in U.S. payment and settlement systems as well as Board and FRB staff members. Email 000959, dated 24 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 24 of 247September 12,2008, is an intra-agency communication sent by an FRBNY staff member to various Board and FRBNY staff members assisting the Board in responding to a possible Lehman bankruptcy filing. A portion of the email provided to the plaintiff states that the attachments are being circulated so that "we [can] be prepared in case we want to invoke the PRe conference call arrangement." Attachment 000960 is a customized, draft email which could be sent to PRe members "ifthere is a bankruptcy event," according to the cover email. Attachment 000961-976 is the Board and FRBNY's comprehensive guide to a PRe emergency conference call which outlines steps that could be taken by PRe members in the event of a threat to, or disruption of, the U.S. payment and settlement system, as well as a timetable for action, individuals designated to take various steps, and contact information for those individuals. Attachment 000977-982 contains a more generic script "that could be adapted to the situation at hand," as stated in the cover email, as well as call-in numbers and contact information for key payments people at PRe banks and institutions. Because Board and FRBNY staff considered the email and attachments as part of the process of deliberation regarding potential responses to a possible Lehman Brothers bankruptcy, I considered the email and the attachments to be predecisional and deliberative and exempt from disclosure under FOIA Exemption 5. I declare under penalty of peIjury that the foregoing is true and correct. Executed in Washington, D.C. on this 1.. day of June, 2011. ~ ~ Alison M. Thro 25 Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 25 of 247Exhibit A Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 26 of 247~ O l u -:25 \ To: FOI.Requests@frb.gov cc: Subject: FOIA Request Date: Mar 21, 2010 Name: Vern McKinley Affiliation: Category of Affiliation: Other Address1: 20745 Ashburn Station Place Address2: City, State: Ashburn, VA Zip: 20147 E-Mail: vern_mckinley@yahoo.com Country: UNITED STATES Country Code: 840 PostalCode: 20147 Telephone: 202-646-5172 (work/home not specified) Fax: Max. Fee: $200.00 Fee Waiver: Delivery: Please mail to above address Request: I am requesting further detail on information contained on page 3 of the following minutes of the Board of Governors of the Federal Reserve dated September 16, 2008 regarding American International Group, Inc. (AIG): http://www.federalreserve.gov/newsevents/press/monetary/monetary20090311al.pdf The source of the power referenced in the minutes is Section 13(3) of the Federal Reserve Act. In particular, I am requesting any and all communications and records concerning or relating to the Board's decision that detail that failure of AIG was likely to have a that were already experiencing a level of as described in the meeting minutes. Please let me know as soon as possible how to go about this information. Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 27 of 247Exhibit B Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 28 of 247BOARD OF 60VERlIORS OF THE FEDERAL RESERVE SYSTEM WASHI1I6TOll. D. C. 20551 ADDRESS OFFICIAL CORRESPOlfDENCE TO THE BOARD March 22, 2010 Mr. Vern McKinley 20745 Ashburn Station Place Ashburn, Virginia 20147 FOIA Request No. F-2010-002S1 Dear Mr. McKinley, This will acknowledge receipt of your e-mail dated March 21, 2010 and received by the Board on March 22,2010, in which you request, pursuant to the Freedom ofInformation Act ("FOIA"), 5 U.S.C. 552, records pertaining to communications and records concerning or relating to the Board's decision that detail that "the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility" as described in the September 16, 2008 Board meeting minutes. In accordance with section 261.17 of the Board's Rules Regarding Availability of Information, unless a request for a fee waiver is granted, this letter also confirms our assumption that you will pay all fees incurred in the processing of your request. You agreed to pay fees up to $200. The Board makes every effort to fulfill requests in a timely manner; however, there may be delays in fulfilling complex requests or those that require consultation. Please feel free to contact the Board's FOIA Requester Service Center at (202) 452-3684 to obtain information about the status of your request. Very Truly Yours, ~ ~ F%v Jeanne M. McLaughlin Manager, Freedom of Information Office Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 29 of 247Exhibit C Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 30 of 247BOARD OF GOVERNORS or THE FE[)ERAL RESERVE SYSTEM WASHINGTON, O. C:. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 19, 2010 Mr. Vern McKinley 20745 Ashburn Station Place Ashburn, VA 20147 Request No. 2010100251 Dear Mr. McKinley, On March 22,2010 the Board of Governors (Board) received your request dated March 21, 2010, pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. 552 for records pertaining to the Board's decision that detail that "the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility" as described in the September 16, 2008 Board meeting minutes. Pursuant to section (a)(6)(B)(i) of the FOIA, we are extending the period for our response until May 3, 2010, in order to consult with another agency or with two or more components of the Board having a substantial interest in the determination of the request. If a determination can be made before May 3, 2010, we will respond to you promptly. It is our policy to process FOIA requests as quickly as possible while ensuring that we disclose the requested information to the fullest extent of the law. Very Truly Yours, Jeanne M. McLaughlin Manager, Freedom of Information Office Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 31 of 247Exhibit D Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 32 of 247BOARD OF GOVERNORS OF'THE: FEDERAL RESERVE SYSTEM WASHINGTON, O. C. cOSSI ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD November 9, 2010 Mr. Vern McKinley 20745 Ashburn Station Place Ashburn, VA 20147 Dear Mr. McKinley: This is response to your email message dated March 21,2010, and received by the Board's Freedom ofInformation office on March 22. Pursuant to the Freedom of Information Act (the "Act"), 5 U.S.C. 552, you request [fJurther detail on information contained on page 3 of the following minutes of the Board of Governors of the Federal Reserve dated September 16,2008 regarding American International Group, Inc. (AIG): http://www.federalreserve.gov/newsevents/press/monetary/monetary20090 311 aI.pdf. The source of the power referenced in the minutes is Section 13(3) of the Federal Reserve Act. In particular, [you request] any and all communications and records concerning or relating to the Board's decision that detail that "the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility" as described in the meeting minutes. By letter dated April 19, 2010, the deadline for our response to your request was extended. Staff searched Board records and located a large volume of information that is responsive to your request. Information being released to you shows that staff monitored the rapid liquidity drain on AIG; gathered intelligence on AIG and its structure, counterparty exposures, and market risk positioning from public and internal sources and from discussions with other regulators, including the OTS, the New York State Insurance Department, and foreign supervisors; evaluated AIG's solvency and liquidity and collateral valuations, the exposure oflarge fmandal institutions to AIG, and the pros and cons oflending to AIG; and assessed AIG's participation in the commercial paper markets and payments and settlements systems, the systemic risk posed by AIG, and the bankruptcy alternative. The responsive information includes confidential fmancial information obtained from regulated fmancial institutions regarding their exposures to AIG; commercial Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 33 of 2472 information purchased by the Federal Reserve Bank of New York ("FRBNY") from a third party provider pursuant to a contract requiring the FRBNY to maintain the information as confidential; and the identities of and select details provided by confidential market sources who voluntarily provided nonpublic commercial information to FRBNY and Board staff. This information will be withheld under exemption 4 of the Act. 5 U.S.C. 552(b)(4). Additional responsive information consists of analyses, deliberations, and recommendations of staff from various levels of the Board and FRBNY regarding the proposed actions to be taken with respect to AIG and the effects that an AIG bankruptcy would have on various markets and systems. This information will be withheld under exemption 5 of the Act. 5 U.S.C. 552(b)(5). In some instances, responsive documents contain personal contact information (telephone numbers and email addresses) for staff and officials, including Chairman Bemanke. The documents also include details of the personal lives of staff. The personal information will be withheld under exemption 6 of the Act. 5 U.S.C. 552(b)(6). Finally, several documents contain or consist of information obtained by supervisors as part of and related to their supervision and examination of financial institutions. This information will be withheld under exemption 8 of the Act. 5 U.S.C. 552(b)(8). All reasonably segregable nonexempt information will be provided to you. The nature and volume of exempt information being withheld will be apparent to you from the face of the documents being provided to you. Your request for information is granted in part and denied in part for the reasons set forth above. The releasable information is being provided to you with this letter. If you believe you have a right to any information being withheld, you may appeal this determination in accordance with section 261.13(i) of the Board's Rules Regarding Availability of Information, a copy of which is enclosed for your information. 1 Very truly yours, Enclosure 1 You are not required to exhaust administrative remedies in this case, but you have the right to do so. Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 34 of 247Exhibit E Case 1:10-cv-00751-ABJ Document 13-2 Filed 06/08/11 Page 35 of 247Z20fOdG7 ::8. vem_mckinley@yahoo.comon03/28/201003:25:58PM .... , ;;SiP(==o:Iiiiifliii' ~-c::=:> ::JtTo: F01.Requests@frb.gov ~ cc: N ...0 Subject: FOIA Request -0 ::.Jt ~ Date: Mar 28, 2010 en N Name: Vern McKinley Affiliation: Category of Affiliation: Other Address1: 20745 Ashburn Station Place Address2: City, State: Ashburn, VA Zip: 20147 E-Mail: vern mckinley@yahoo.com Country: UNITED STATES Country Code: 840 PostalCode: 20147 Telephone: 202-646-5172 (work/home not specified) Fax: Max. Fee: $200.00 Fee Waiver: Deiivery: Please mail to above address Request: I am requesting any and all communications and records regarding analysis undertaken regarding Lehman Brothers and the assessment in S