Banks, insurance companies and automakers are going to have to find a new way of doing business. For years, much of what our financial institutions have done has been cloaked in secrecy. Even car companies have closely guarded industrial secrets. This was all fine and good while they were free market institutions whose investors could freely chose whether or not to entrust their wealth to the management of a company.
All that changes when a company takes a bailout from the government. Suddenly, a bailed out company is funded by involuntary investments from taxpayers, most of whom opposed the bail outs. They no longer can claim that investors entered into the arrangement with the contractual understanding that, despite their ownership stake in the company, they won’t have access to inside information.
Government ownership will mean a whole new level of public accountability. Or, rather, it should. It seems the banks still haven’t adjusted to the new regime. They want government money but they don’t want public accountability.
But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,'” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?
None of the banks provided specific answers.
“We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.
Some banks said they simply didn’t know where the money was going.
“We manage our capital in its aggregate,” said Regions Financial Corp. spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.
No doubt banks will claim that secrecy, or ‘client confidentiality,’ is an important part of our the way they do business. Indeed, many bankers probably regard the demand for accountability and transparency to be ridiculous.
And they are right, in a sense. They long for the days when they weren’t operating under ridiculous levels of scrutiny, when bonuses and lending decisions could be made without consulting public officials who really have no idea how to run a bank. They long, that is, for the days when they were successful companies. The days before the bailout. Before it all became ridiculous.