Today's Outrage: Banks on Double Secret Probation - TheStreet

Today's Outrage: Banks on Double Secret Probation

Banks are being put on double secret probabation by regulators at a faster clip this year than in 2008. But the government doesn't want you to know that.
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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) - Get Report

is the biggest name listed along with three smaller regional banks including

Fidelity Southern

(LION) - Get Report

,

Colonial BancGroup

and

Riverview Bancorp

.

The regulators are loath to publicly disclose the banks they are leaning on because they don't want to unnerve depositors or shareholders. I guess they hope they can quietly get everything fixed up without having to worry folks.

So don't expect a heads up if a bank you own or put money into is about to fail.

You'll just have to trust that the government has everything under control.

And we better all hope that the banks take their double secret probation more seriously than the Delta House.

That means no toga parties!

Glenn Hall is the editor of

TheStreet.com

. Previously, he served as deputy editor and chief innovation officer at

The Orange County Register

and as a news manager at

Bloomberg News

in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at

The Journal-Gazette

in Fort Wayne, Ind. His work also has been published in a variety of newspapers including

The Wall Street Journal

,

The New York Times

and

International Herald Tribune

. Hall received a bachelor's degree in journalism and political science from The Ohio State University and a certificate in project and program management from Boston University.