Friday, April 10, 2009

The Fed: Don't Ask, Don't Tell

Efficient markets require information and transparency. The more we get, the faster the information is distributed to all the better it is for investors to make more intelligent decisions. We learn that in economics 101.

Regulators punish those who trade on insider information available to only a few. We also require quoted companies to publish their financial statements on a timely basis audited by reputable accounting firms. False information is a crime. Lack of disclosure is normally taken as a sign of troubles and markets mark down the prices of those who do not disclose much.

What is happening these days in Washington is mind-boggling. The Federal Reserve Bank is asking the banks not to disclose the results of "stress tests"which the Treasury secretary has so loudly touted as a central feature of his rescue operation. (Here.)

I have a better idea. Let's abolish the requirement that quoted companies must publish anything at all!

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