Show me your CAMELS, Mr. Lewis!

Last Thursday, the House Committee on Oversight and Government Reform released documents related to the Bank of America / Merrill Lynch fiasco. Included in these documents was a "restricted" internal Federal Reserve document that mentioned BofA's CAMELS rating. Those of us who have heard FDIC or other examiners give the boardroom speech about the "highly confidential nature of the CAMELS rating" know how serious regulators are about the secrecy of bank ratings, and with good reason. If the ratings were public, a bank with a less than satisfactory rating might be exposed to an old fashioned "run on the bank" -- something we all want to avoid.

Should it be a surprise that our elected officials can't keep a secret? It's no wonder why the CIA and FBI don't like dealing with the Hill!

As a result of this security breach and the witch hunt attitude echoing through the halls of Congress (not that the attitude is completely unjustified) over the financial crisis of 2008, look for less cooperation among the various regulators and their policitcal overlords in months to come. Add to the mix current attempts by the Obama administration to reform and rearrange the regulatory deck chairs and you get one very murky witches' brew in Washington.

By the way, BofA's CAMELS rating was a 2 (on a scale of 1-5, where 1 is best). Nothing to be ashamed of, but Bloomberg managed to make it sound bad, quoting a college finance professor as saying "For a big bank, a CAMELS of 2 is a questionable rating". Yet another reason the regulators don't want the ratings disclosed... (I wonder how many examination reports this finance professor has read lately?)

For more on the disclosure, see
http://www.bloomberg.com/apps/news?pid=20601087&sid=abkxoZue_3uo and
http://www.bloomberg.com/apps/news?pid=20601208&sid=adfHHDDmHmgU

(I have no idea how long these links will work.)