Can Publicly Traded Banks Keep Fed & Treasury Bailouts Secret?
Will the Securities and Exchange Commisson permit publicly traded financial institutions to keep informaton about their government bailouts secret? That approach certainly does not favor the investor and other industries are likely to demand the same right to keep their troubled financial condition secret for the sake of the economy.
My understanding of TARP is that bailout recipients are required to sign over equity to to the US government. Is the SEC going to permit those instututions to keep information about a significant change in ownership secret?
If publicly traded companies do not have to comply with SEC financial reporting reguirements anymore, investors can't make informed investment decisions.
Undermining public confidence in the integrity of US stock markets doesn't sound like a very good idea to me but I'm not a financial genius like Ben Bernanke and Henry Paulsen.
On a slightly different note, I wonder if the American Institute of Certified Public Acountants will issue a statement describing the circumstances under which a client can refuse to disclose material financial information to its auditor.
Imagine an investor reading this audit opinion: "The financial statements are in accordance with GAAP but don't rely on them because the company keeps a lot of important information secret as mandated by the SEC, Treasury and Federal Reserve."
I can't be the only one online who has raised this question.
Good point. If it's a publicly owned bank, using public funds, the public should have a right to know how the money's being used,
December 15, 2008 9:22 AM | Reply | Permalink
This is definitely one of those questions with two answers, neither one of which is wholly right or wrong. Do we expose the relative insolvency of these institutions publicly and risk public withdrawal of funds further endangering their financial position while in the process doing no favors to current investors and potentially putting a greater load on the treasury through FDIC insurance payments? Or do we keep it quiet until they are hopefully more stable, again not doing any favors to the investors, and potentially reaping the same results posed in the first question? It goes back to whether the overlords deem the public capable of being able to handle the information wisely. I personally lean toward disclosure, but will hold my breath when so disclosed and more especially if the banks holding my funds are named.
December 15, 2008 4:01 PM | Reply | Permalink
Does anyone REALLY trust what publicly traded companies report as their financial results anymore? Particularly since Enron exposed how hollow GAAP became due to deregulation.
Annual and Quarterly reports hardly, if at all, rise above fraud.
December 15, 2008 4:06 PM | Reply | Permalink
You're right unfortunately. Rebuilding the public's and the world's trust in our financial market is one of our major challenges.
December 15, 2008 4:12 PM | Reply | Permalink
This is really a more important question than I first gleaned from the title. We run into this private/public thing all the time with defense contracts. We couldn't find out where a good deal of our defense monies go if we wanted to.
Everytime we outsource, this becomes a problem.
Ditto with public funds going into private institutions. I am going to have to think about this a long time.
A lot of this is jurisdiction too. Sometimes no access to courts let alone the info if you can get inside the courts.
And when something is hidden from public eyes privateers are making a lot of money that is unaccounted for.
December 15, 2008 9:25 PM | Reply | Permalink