You don’t want to know how banks make their sausage

NORMALLY, the words exchanged between bank and regulator don’t leave the room.

Bank examiners are bound by strict confidentiality requirements that can land them with fines or even jail time if they are breached. Nor can banks themselves reveal confidential supervisory information because even though they are party to it, the material is deemed the property of the Federal Reserve. And good luck trying to lodge a Freedom of Information request. Exemption 8 of the Freedom of Information Act explicitly exempts from public disclosure any information “contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions”.

When a bank fails, though, none of these protections apply and it all comes tumbling out. Last week, the Federal Reserve published a 118-page post-mortem of its relationship with Silicon Valley Bank (SVB) and uploaded to its public website 25 previously confidential letters and reports its supervisors had sent to the bank. The Federal Deposit Insurance Corporation published a more slimmed-down version of its dealings with Signature Bank.