American Banker reported earlier this week that the FDIC has done an about-face on disclosure—and not in the right direction. It’s now withholding bidders’ names and the amount of their bids when it sells off busted banks.
The paper reports that this is a reversal of long-standing FDIC practice, and it’s only happened in the last three months. It’s now refusing Freedom of Information Act requests for the information, which, according to the sources in the story (reported by Marissa Fajt, whom I know from college), violates that law.
Jeffrey C. Gerrish, a partner at Gerrish McCreary Smith PC in Memphis, speculated that bidders might be telling the FDIC that they want to keep quiet about their plans to do bank acquisitions.
“They don’t want to do anything that chills acquirers bidding on failed banks,” said Gerrish, who was an attorney for the FDIC decades ago. “The rationale might be, ‘We don’t want these folks who weren’t successful to be in the public because they bid on it.’ “
But Gerrish said that logic still would not allow for the change, because the law requires disclosure.
To which I have to say, what else is the FDIC going to decide it needs to hold back?
And it’s always good to tweak the Obama White House when it violates its openness pledge:
Several observers also said the Obama administration has promised to be more transparent, making the FDIC change all the more puzzling.
“This seems to run very counter to the direction from the White House,” said Patrice McDermott, the director of OpenTheGovernment.org, a coalition of 70 organizations that works for government accountability.
McDermott also said only Congress can change the law that determines what is public information, so the FDIC is overstepping its bounds both in delaying the release of the bids and in contemplating a permanent change. “I don’t know where they think they get the authority to do this.”
This isn’t in the same league as Bloomberg’s lawsuit against the Federal Reserve, but it’s always good for the press to keep an eye on creeping government secrecy—especially at a time when it’s so busy spending our money to cover private companies’ mistakes.
And it’s something the national newspapers, with their bigger megaphones, ought to look at.
UPDATE: Matthew Goldstein of Reuters is the first person in the major media to pick this up:
The FDIC announcement is disturbing because it comes at a time that the FDIC has been forced to close banks at a brisk clip and just put in place a plan for allowing private equity firms to bid on bank assets.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at firstname.lastname@example.org. Follow him on Twitter at @ryanchittum.