Questions and concerns surround provisions that grant more secrecy to government regulatory bodies.
By Micah Hanks
With the passage of a sweeping financial reform bill last week, what had been touted as an instrument for providing transparency is turning out to more closely resemble a permanent marker, concealing information and accountability in broad strokes.
The US Securities and Exchange Commission, the country’s largest regulator of the securities industry, has seen a busy year with 2010. Michael Corkery at Wall Street Journal’s Deal Journal Blog notes a $550 million penalty the Commission filed against Goldman Sachs, in addition to $150 million charged to Bank of America, which was increased from $33 million at the order of a federal court. Finally, a $23 million fine was also imposed by the SEC against General Electric subsidiaries for bribery, prompting Corkery to ask whether the SEC, under President Obama, is tougher than it was under George W. Bush.
Tougher, in a sense, might be accurate… but thanks to provisions included within President Obama’s recent Financial Reform bill, they are also granted exemption from having to comply with Freedom of Information (FOIA) requests pertaining to information that deals with “surveillance, risk assessments, or other regulatory and oversight activities.” Fox Business Network saw this in action on Tuesday, after having an FOIA request refused by the SEC, who cited the provision in their response. Steven Mintz, representing the news agency, described it as an arrangement “cut between Congress and the SEC to keep the SEC’s failures secret.”
This, of course, is concerning as the recollection of the Bernard Madoff fraud comes to mind, in which the SEC failed to investigate a variety of questionable activity that included what some said were “impossible” financial returns with the methods Madoff claimed to use. In the future, will this kind of oversight go unnoticed, thanks to limitations on what information the SEC has to disclose? Larry Doyle, President and Chief Operating Officer of Greenwich Investment Management, commented in a January article about SEC Head Mary Schapiro’s apparent desire for greater transparency, noting how Schapiro, testifying before the Financial Crisis Inquiry Commission in January, referenced “transparency or the need for greater transparency approximately 15 times” in her opening statement alone. Doyle highlighted for us here an excellent example of government talking the talk, and conveniently stumbling when the walking part of the equation comes around; and yet it seems to be a recurring trend among officials these days.
The brand of “transparency” the recent financial reform bill entails isn’t limited to organizations like the SEC, however. Let’s not forget that the Federal Reserve will be housing a new oversight group called the Consumer Financial Protection Bureau. It is interesting that the Fed was placed in charge of this new operation, since they carry out the majority of their meetings in secrecy, in an effort to prevent their decisions from influencing the market in erratic ways. There is logic to this, but it also prevents the general public (and no doubt most of our elected officials) from maintaining a clear understanding of expenditures and other monetary concerns that will have an effect on our economy in the long run. President Obama’s promises of greater transparency again failed before the threat of a bipartisan move toward legislating an audit of the Fed’s activity, with the White House issuing statements in strong opposition that resulted in negotiations between Rahm Emmanuel and Vermont Senator Bernie Sanders, who introduced the audit bill before the Upper House.
In reality, the administration’s objective, it seems, is to control as many large corporate bodies as they can, while limiting the means by which their own activities can be monitored. The new financial reform bill could even allow for institutionalized government bailouts of certain businesses, all the while allowing potential seizure and divestment of holdings from those it deems a “threat” to the economy. Neil Barofsky, Special Inspector General of the TARP program, noted in a recent report that the closing of hundreds of automobile dealerships early in Obama’s presidency may have been unnecessary. Initial plans requiring fewer closings were rejected by the administration, according to Barofsky, who was critical of their decision to move forward with a plan that shut down nearly 2,000 dealerships instead. Can we trust that this administration will make better assessments of “problem” businesses in the future?
If not, it is questionable whether we would even know about it before the economic repercussions struck us, in the absence of warnings that greater transparency all along could have provided.
Image by sachab via Flickr.
