Banking on secrecy; with our banks about to go the way of our S&Ls, it's time we made the Freedom of Information Act cover financial institutions too

Washington Monthly, Dec, 1990 by Teresa Simons

Freeing up FOIA

Of course, just because the information is there, it doesn't follow that the press is going to do its job and report it to Joe Taxpayer. And it doesn't mean that Congress will do the right thing either. Congress knew quite a bit in 1987 when it passed a flimsy bailout bill that grossly underestimated the S&L problem and sided with the people who were causing it. When Michael Binstein was leaked more than 300 pages of secret documents on Lincoln Savings and published the spectacular findings in the Washington D.C. business and politics magazine Regardie's in 1987, not one other reporter asked to see the documents. And this year, Steven Pizzo had to go to Penthouse to publish a story that he wrote on how CIA freelance operatives took full advantage of the thrift situation, using federally insured bank and thrift money to fund politically unpopular covert activities. (Peter Brewton published stories on the same topic in The Houston Post.)

But it would be a lot harder for Congress or the press to sleep on the job if the facts were staring them in the face, or at least were a few blocks away in a room full of public documents. Other publications might have run a story similar to Binstein's if one of their own reporters could get access to the same documents--if it were just a matter of following up on what he or Brewton had already dug up in the public record. Keating's top lieutenant, Judy Wisher, once said in court testimony that the Regardie's piece was "very, very damaging," that it curtailed the thrift's brokered deposit program and caused lenders to refuse to renew some of its holding company's credit lines. And that was a story published locally on the other side of the country. Imagine what would have happened if Binstein's piece had run on the front page of the Los Angeles Times. The chances are pretty good that Keating would not have subsequently been able to dupe 23,000 southern Californians out of their life savings while Bank Board Chairman Danny Wall and other Washington regulators were offering pat reassurances.

Which points to a truism about government: While some regulators like Wall will always take the easy way out and soften their criticism out of fear that they will upset a powerful figure, in general regulators do a better job if they know their work will become public. And that fact makes it a lot harder for their bosses to suppress their good efforts. The upshot is that taxpayers find out a lot more about their government--disclosure is how safety problems were directly linked to poor management within NASA, how the FBI was caught conducting illegal surveillance of hundreds of American citizens and groups opposed to the administration's policies in Central America, and how we finally learned that former high-level government officials successfully used their political influence at HUD to rake in large fees from developers.

Recent improvements at private medical labs clearly illustrate the kind of cleanup that disclosure can prompt in an industry where the public release of regulators' documents, SEC filings, nonprofit agency tax forms, or other records allow the public to make sure regulators are protecting consumers. The Wall Street Journal's Walt Bogdanich used an array of documents from federal and state health regulators and court records to prove in 1987 that inaccurate and unreliable testing of body fluids and tissues at clinical labs was a serious health hazard as well as a waste of million of dollars.