However, I don’t think this will be possible unless a great public out-cry happens to demand this. There are many incentives at the policy creation level and bank management level against such disclosure. Banks don’t want to publicize their errors. Government doesn’t want to make things worse and have to nationalize a large part of the banking system. And even in the best case, there will be constant criticism, conspiracy theories, and idiot talking heads trying to take advantage when they really don’t have a clue.

Speaking of making things worse, what happens if (insert name of Least Favorite Bank here) can’t sell their “legacy” assets at any price above zero through the PPIP and it becomes obvious they really are insolvent? You’ll have a run on LFB. LFB shares are suddenly worthless. The FDIC immediately seizes LFB wiping out all account balances over 250K, LFB shareholders, and LFB bond holders. What if LFB turns out owe huge amounts to other banks who in turn become insolvent? It won’t be a creeping nationalization for inter-connected banks, it’ll be fast.

What does that then do to the other PPIP participants who don’t have claims on LFB or any bank connected to it? Does it make them look bad and does it cause runs on them too? Do bank stocks hit the floor again, or do they just go directly through that and into the basement and sub-basement?

With the ability to keep things hidden, Treasury, the Fed, and the FDIC have the ability to clean up the mess behind a curtain. This curtain can hide many things. Global investors my never know exactly how rotten the US banking system had gotten. Daisy chains of insolvency can be wound up in a controlled manner. This might be a good thing for the average US citizen even if they take a tax hit. Also, it may allow the PPIP auctions to be rigged to cheat the taxpayer as Dr. Housing Bubble and others have suggested.

Keeping your efforts hidden is the natural tendency of egotistical, self-important people in charge of cleaning up messes whose careers depend on how well they can clean up. If you do a great job, you can pull off the curtain and yell “ta-da”. If you don’t, you can leave the curtain on and walk away whistling and hoping no one notices in time to hammer you for it.

The organizational problem with keeping the curtain up, is that you rely only on your own abilities to ferret out people abusing the system. Opening everything up for scrutiny recruits every interested party in monitoring the system. With a non-transparent system, Geitner and the PPIP management team are the only ones monitoring for fraud. If they are corrupt, incompetent, or both, this will end badly, maybe very badly.

I would really like to see your opinion on what I asked above. If there is a flaw to my thinking, I’d like to find out. Thanks.

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered.”

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”

Thomas Jefferson

The more and more I see the two parties fight over the red, stinking herring the more I realize we are expected to inhale it’s rotting smell and follow its trail.

We live in a two party(class) system: .gov/banking industry (the rest of big business is small-fry) and us, the consumer.

This will also be a formidable lesson on moral hazards: If you have no morals, there are no hazards. Madoff was just a microcosm of the entire global system of finance. this really doesn’t look to end very well.