The Federal Deposit Insurance Corporation (FDIC) is making less information available to the public about how it is dealing with the rising number of bank failures in 2010. Over the last year, the agency has failed to post a complete list of bids on 41 percent of the deals it makes with other banks to take over failing institutions–and what information it does provide is more limited than before.
Before May 2009, the FDIC would provide, upon request, the names of all entities placing bids on failed banks and how much each of them bid for the bank in question. Then the agency suddenly stopped–a move that provoked sharp complaints about lack of transparency, particularly in the business community.
Many bidders and those that advise them themselves rely on this information to help them develop business strategy for placing their own bids. "We have been doing this for 20 years, since the late '80s," Randy Dennis, the president of DD&F Consulting Group told the American Banker at the time. "We have every winner and loser for every FDIC acquisition for a long, long time. It allows us to have a better perspective, and the bankers to be better-informed bidders."
Ken Thomas, a Florida banking consultant who files Freedom of Information Act (FOIA) requests frequently with the agency, observes that the agency stopped making bids public after a consortium of private equity firms including the Carlyle Group and Blackstone Capital Partners bought BankUnited, which held $12 billion in assets, in Coral Gables, Florida in May 2009. "Losers do not like their names being mentioned as losers," he says.
However the agency has not revealed why it made its decision. In November 2009, the FDIC board of directors announced a new policy–a decision made behind closed doors, with no public comments solicited, according to FDIC spokesman Greg Hernandez. It would start providing information about these bids online, but in more limited fashion than before. Rather than providing information about all bidders, the agency would post the name of the winning bidder and the details of its bid. It would omit all information about the second-place bidders. The names of the rest of the losing bidders and the details of the bids would be provided, but delinked so that it would not be possible to connect a given bidder with its bid.
As first reported by the American Banker, the FDIC has been slow to meet its pledge. Since the announcement of the policy, the agency has failed to post this limited information for 73 out of 167 failed banks that had purchasers since November 2009, according to a review by the Sunlight Foundation. For the rest of these banks, the purchase agreement is available. (See spreadsheet below for Sunlight's analysis, based on FDIC's list of failed banks, which can be found here. When bid information is supplied for a bank, the "bid info available" column is marked "yes" and a hyperlink is provided to that information. In some cases there is no acquiring institution; those are marked "n/a.")
Why the delay? Hernandez says it's a matter of resources. "It takes some time to have the legal documents reviewed for things like proprietary information…Once those legal documents are examined fully, they are posted online. Because of the large number of failures the past three years, the process is moving as quickly as possible," he wrote in response to an email query.
"We'd like to have as many facts as possible to see where the bidding process ended," says C. Robert Monroe, a partner with the Missouri-based Stinson Morrison Hecker LLP, who advises clients on acquiring failed banks. He adds however, that "history is great," but you still have to make a bid within your comfort level.
The Sunlight Foundation today filed a Freedom of Information Act (FOIA) request with the FDIC asking the agency to provide all information about failed bank bids, including names and details of the bids.