Overdoing Secrecy

March 28, 1994

Depending on where you sit, whistle-blowers are a menace to society or valiant protectors of the public interest. Bureaucrats hate them, public interest groups and journalists love them.

The State Bank Commissioner is one who thinks they need to be curbed. The agency regulating Maryland banks is backing a bill that would make it a crime to disclose the contents of an examiner's report.

Examiner's reports are not public information, and that is not at issue. They contain confidential appraisals of a bank's financial condition, management and operations that are not meant for general circulation. State officials have always considered them their property, not to be shared without permission, but the law has not been explicit. Furthermore, federal bank examiners, who work closely with their state counterparts, forbid sharing their reports outside the banks' managements.

So where's the problem? It seems there were rumors that an unflattering examiner's report on the Bank of Baltimore was going to be leaked by a dissident during the rough-and-tumble proxy fight for control of the bank three years ago. Just rumors, nothing more. In fact a report has never been leaked, as far as anyone in the business can recall. So why make it a crime now? To discourage anyone from even thinking about it.

But is it always in the public interest to keep secret information that a particular bank is shaky? Almost always, yes. But there could be circumstances when insiders know a bank is in trouble, and regulators might not be as diligent in cracking down as they should be. Marylanders don't need very long memories to recall that sort of situation in the savings and loan industry, another type of financial institution. Conceivably it could be in the public interest to disclose the problem, if that is what it takes to galvanize legislators or high-ranking state officials.

It is already against the law to cause a run on a bank, one of the stated fears of the bank examiners if one of their unfavorable reports got out. And it would be appropriate to pass a law in Annapolis making it a crime to leak a report for personal gain, as was rumored in the proxy fight. But making it a crime under all circumstances to release a document by a public agency so that the public -- not just insiders -- might be protected smacks of coddling, not regulation.

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