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Columbia Missourian

Public suffers when Congress, Wall Street aren't transparent

By Charles Davis
October 4, 2008 | 10:00 a.m. CDT

As the nation sloshes through the wreckage of Hurricane Subprime, wondering what fails next, transparency is suddenly a buzzword on the tips of many a congressional tongue.

A quick Google search unveils the nation's leaders calling, again and again, for less Byzantine processes, for financial information to be unleashed to the investing public, for a veritable flood of sunshine to sweep down Wall Street.

Sen. Bill Nelson, D-Fla., was emblematic of the openness movement in the nation's capitol.

"Any proposal needs to help homeowners restructure their mortgages to avoid foreclosure. Also, we need more transparency and accountability from Wall Street; and, we need to rein in excessive executive pay that isn't based on performance," Nelson said.

Others echoed that sentiment, from Sen. John McCain (who called for "transparency and accountability" on Wall Street) to Sen. Barack Obama and heck, even Ralph Nader, who has been calling for greater transparency on Wall Street for years now.

It's heartening to see America's political leadership seize on the secrecy plaguing our financial instruments, but excuse me for getting too giddy after Congress spent the better half of the week in an endless series of closed-door meetings.

That's right: in case you didn't notice, every substantial meeting in which our national leadership discussed the most dire threat to the country's well-being in modern history occurred after the press was ushered into the hallways. Secrecy has become such an accepted part of the Beltway landscape that no one seemed to protest even a little.

Surely I don't think that the ticklish negotiations over the bailout bill could take place in the light of day? Well, yes, I do. I subscribe to the quixotic notion that our elected representatives should put on their big-boy pants and do the job, free from smoke-filled rooms that embolden ideologues and provide valuable cover for discussions of election-year politics.

I ask you: could the negotiations have been less poisonous, less public interest-minded, in public, where the American taxpayer could hear directly from their elected representatives? Could the electorate have been a bit more informed with a more direct stake in the process?

It's asking a lot for a legislative culture that embraces such endemic secrecy to ask greater transparency of private companies.

A head-turning piece on the website of the Reporters Committee for Freedom of the Press raises the troubling possibility that the accounting measures adopted by the banking industry, with the tacit approval of congressional oversight bodies, fueled the debacle.

"Some experts say the problem is not that banks and other financial services companies are required to give out more data than before, or that they're not following the rules, but others disagree," the story said.

But without access to that data, we're left to rely on the good graces of others, essentially taking for granted how the balance sheet data was computed and with what accounting methods. Others dispute that notion, arguing that accounting rules are not the problem.

"Accounting helped to make this crisis less of a crisis, if that's possible," Charles Mulford, an accounting expert and professor at Georgia Tech University, who favors disclosure of those methods, told the Reporters Committee. It gave the public a better read sooner rather than later on the problems banks are facing, he said.

I have no idea — one look at my bank balance and you'll know accounting is not my forte — but I suspect the weakness of the system has less to do with the accounting and more to do with accountability itself. The transparency problem might lie less with Wall Street and far more with the regulatory apparatus and Congress, where despite the best efforts of accountants, such disclosures mean little if you can't look at a balance sheet when assets have been securitized and know, at a glance, the obligations of the company. Closed government meets murky Wall Street, and the rest of us suffer.

Perhaps Congress can hold another round-robin marathon of closed meetings and tell us more about the transparency movement they've hatched.

Charles Davis is the executive director of the National Freedom of Information Center and an associate professor for the MU School of Journalism.