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Today's Outrage: Banks on Double Secret Probation

Today's Outrage is published weekdays at 9:30 a.m. EDT and is available as an RSS feed.

NEW YORK (TheStreet) - What is this, "Animal House" and Obama is Dean Vernon Wormer putting the banking fraternity on double-secret probation?

That's the way it sounds reading the Wall Street Journal today, in an apparent follow-up to its report last August that revealed the swelling numbers of secret memorandums of understanding between federal regulators and struggling banks.

Never mind the apparent glee with which the Journal issued its now-annual Freedom of Information Act revelations -- pointing out that the Feds are on a pace to issue more warnings in 2009 than they did last year after making the same point last year about 2008 vs 2007 -- I'm outraged by the fact that it requires so much effort to find out what our government is doing.

Apparently these previously secret documents that required such effort to make public reveal that regulators are on pace to put more than 600 banks on notice by the end of this year, compared with 399 notices in 2008 and at least 213 in 2007.

Even more bizarre is that these actions are taken by three separate agencies - the Federal Reserve, the Treasury Department's Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. I hope they are at least coordinating their actions.

The result of these secret orders is that the banks are forced to raise capital, change management or take other measures, which the Journal not surprisingly reports that the banks consider onerous.

It's unclear how much information was revealed to the Journal, but there's precious little detail about which banks are being sanctioned. Bank of America (BAC) is the biggest name listed along with three smaller regional banks including Fidelity Southern (LION), Colonial BancGroup and Riverview Bancorp.

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