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The Bailout Secrecy Game

The news on Friday and over the weekend was that the Treasury Department will not announce which banks are getting cash infusions in the next portion of its modified bailout program. The standard line is that Treasury announcements about our “investments” in the financial sector are being restricted because those announcements would label winners and losers. And for some reason that’s bad.

(I said “modified”: Recall that the bailout was supposed to be the purchase of troubled assets from financial institutions. Now, it’s about about buying pieces of the financial institutions themselves. And it may be extended soon to insurance companies – and then automakers!?)

But there’s another interest at stake, beyond this “winners and losers” justification. Remember the pressure Treasury is under from the blogosphere for hiding its payments to financial services providers like New York Mellon Bank? Be confident that this is causing Treasury bureaucrats some discomfort.

By keeping its latest list of investments obscure, Treasury reduces by just a little bit the ability of the average taxpayer to figure out what it’s doing. The result? More freedom of action for the Treasury Department.

In the contest between its own power and the “good government” practice of transparency, a government agency will always choose to enhance its own power. What we’re seeing here is nothing sinister – it’s exactly how you’d expect an agency to act. But hidden government doesn’t need to have sinister motives to cause bad results.

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