NEW YORK -- The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court has ruled.

The 2nd U.S. Court of Appeals in Manhattan said Friday that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.

The Fed had argued that disclosure of the documents threatens to stigmatize borrowers and cause them "severe and irreparable competitive injury," discouraging banks in distress from seeking help. Banks and the Fed warned that revealing the documents might cause a run or sell-off by investors in the bailed-out lenders. Disclosure might also hamstring the Fed's ability to deal with another crisis, they contended.

A three-judge appeals court panel rejected those arguments in a unanimous decision. The U.S. Freedom of Information Act, or FOIA, "sets forth no basis for the exemption the board asks us to read into it," Circuit Chief Judge Dennis Jacobs wrote in the opinion. "If the board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute."

The opinion may not be the final word in the bid for the documents that was launched by Bloomberg LP, parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court.

If Friday's ruling is upheld or not appealed by the Fed, it will have to disclose the requested records. That may lead to "catastrophic" results, including demands for the instant disclosure of banks seeking help from the Fed -- resulting in a "death sentence" for such financial institutions, said bank analyst Chris Kotowski at Oppenheimer & Co. in New York.

"Whenever the Fed extends funds to a bank, it should be disclosed in private to the congressional oversight committees, but to release it to the public, I think, would be a horrific mistake," he said in an interview. "It would stigmatize the banks;, it would lead to all kinds of second-guessing of the Fed, and I don't see what public purpose is served by it."

Sen. Bernie Sanders, a Vermont independent, said the decision was a "major victory" for U.S. taxpayers. "This money does not belong to the Federal Reserve," he said in a statement. "It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone."

The Fed is reviewing the decision and considering its options for reconsideration or appeal, Fed spokesman David Skidmore said.

"We're obviously pleased with the court's decision, which is an important affirmation of the public's right to know what its government is up to," said New York attorney Thomas Golden, Bloomberg's outside counsel.

The court was asked to decide whether loan records are covered by FOIA. Historically, the government documents sought in the case have been protected from public disclosure because they might reveal competitive trade secrets. The Fed had argued that it could withhold the information under an exemption that lets federal agencies refuse disclosure of "trade secrets and commercial or financial information obtained from a person and privileged or confidential."

The Clearing House Association, which processes payments among banks, joined the case and sided with the Fed. The group includes ABN Amro Bank NV, a unit of Royal Bank of Scotland Plc, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., US Bancorp and Wells Fargo & Co.

Clearing House General Counsel Paul Saltzman said the decision did not address the "fundamental issue" of whether disclosure would "competitively harm" borrower banks. "The 2nd Circuit declined to follow the decisions of other circuit courts [in] recognizing that disclosure of certain confidential information can impair the effectiveness of government programs, such as lending programs," he said in a statement.

He added that the Clearing House is considering whether to ask for a rehearing by the full appeals court or, ultimately, Supreme Court review.

Bloomberg, majority-owned by New York Mayor Michael Bloomberg, sued after the Fed refused to name the firms to which it lent or disclose loan amounts or assets used as collateral under its lending programs. Most of the loans were made in response to the deepest financial crisis since the Great Depression.

Bloomberg lawyers argued in court that the public has the right to know basic information about the "unprecedented and highly controversial use" of public money. "Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public's right to learn basic information," Mr. Golden wrote in court filings.

Washington correspondent Daniel Malloy writes the "Pittsburgh On The Potomac" blog exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.