Fed email disclosure could chill info sharing among banks

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: Former US bank regulators warned that lenders and supervisors may share less information with each other in day-to-day dealings after lawmakers released dozens of confidential Federal Reserve emails.

“The regulatory process could be chilled or stifled because of a reluctance to speak candidly,” said Robert Clarke, a former comptroller of the currency and now a senior partner at Bracewell & Giuliani LLP in

Houston. At a minimum, supervisors may communicate less via email, said Oliver Ireland, an ex-Fed attorney now at Morrison & Foerster LLP in Washington.

The criticisms may slow a push for greater transparency among regulators by President Barack Obama’s administration, which is seeking the biggest overhaul of US financial rules in decades. Consumer advocates have hammered the Fed and other agencies for failing to publicly identify banks with lax lending standards during the credit boom that turned to bust.

The House Oversight Committee’s release of internal Fed documents at hearings in June showed confidential supervisory discussions and data can end up subject to public scrutiny.

Included in the releases were the Fed’s private gauge of Bank of America Corp’s financial strength, and communications between officials including chairman Ben S Bernanke and Richmond Fed President Jeffrey Lacker on the bank’s threat to call off purchasing Merrill Lynch & Co.

The documents were obtained under subpoena as part of the House panel’s examination of the government’s January rescue package for Bank of America.

The material included private exchanges among Fed officials in Washington, New York, Boston and Richmond, Virginia, about concerns that Bank of America would break off its Merrill purchase, deepening the financial crisis. Among documents divulged was a full analysis of Bank of America, along with a numerical rating of its condition, normally not made public.

“Federal banking regulators have an ironclad tradition of preserving the confidentiality of exam ratings,” said Patricia McCoy, a University of Connecticut law professor who teaches banking and securities regulation. “The concern is that if a rating comes out and it’s relatively weak, there could be a run on the bank.”