Make bank finances public so rest of us know what’s in the till

By Robert M. Williams Jr.

It was 1913 when Louis Brandeis — later a justice of the U.S. Supreme Court — first wrote of the disinfecting power of sunshine. Brandeis was discussing the impact of public disclosure on the growing power of financial combinations in the securities market.

“Publicity is justly commended as a remedy for social and industrial diseases,” he wrote, recommending the sunshine of full disclosure as the remedy.

It took 20 years and a national economic crisis for Brandeis’ prescription for effective regulation of financial institutions to become law in the first round of New Deal regulatory reforms.

In another 60 years, though, the pendulum swung the other way. In the 1990s, Congress repealed those reforms in a frenzy of deregulation many believe to be responsible for the current economic mess.

In 1994, without hearing or debate, Congress began a series of deregulatory actions that led to the repeal in 1999 of the Glass Steagall Act, last of the New Deal laws that protected us from irresponsible bank investment practices.

That one 1994 step seemed relatively small. Time has proved differently, though. In so doing, Congress removed a requirement that banks publish their quarterly financial results in the local newspaper of record. Bank performance, until then, had been easily monitored at the local level by those whose money was in the bank.

And then we were blinded. Repeal of the requirement for local notices of bank performance meant no one had ready access to the basic information about how banks are doing. Are they making money? Are they investing wisely? Will they be there next year? Ever since 1994, an inquiring mind would have a hard time finding answers to those questions.

The public learned — too late — that some banks had grown “too large to fail” and Uncle Sam would be required to borrow billions of dollars to save them.

Most of us were, unfortunately, clueless about the practices being followed in banking. The primary function of bank financial reporting — to keep the general public informed about the financial condition of the bank —had been defeated by deregulation.

Now there is a proposal in Congress that would restore the sunshine of open access to this vital information. The Financial Transparency Restoration Act, HR 2727, would once again require financial institutions to publish public notices with information about their performance.

The bill was introduced by Rep. Walter Jones, a Republican from North Carolina. Jones believes, and we agree, HR 2727 is important to restore basic accountability in financial services.

It might have been in 1913 when Brandeis told us, “Sunshine is said to be the best of disinfectants.”

Years, and many billions of dollars later, we can say with certainty he was correct.

Robert M. Williams Jr. is publisher of the SouthFire Newspapers Group in Blackshear and chairman of the National Newspaper Association’s Government Relations Committee.