After six months of withholding all the losing bids made for failed banks, the Federal Deposit Insurance Corp. has decided to resume releasing much of the information.

Industry observers said they are pleased that there will be less secrecy, but many also complained the agency did not go far enough.

Norman C. Skalicky, the chairman and chief executive of Stearns Financial Services Inc. in St. Cloud, Minn., said he finds the bids useful and does not think any harm could come from releasing the information to the public.

"Transparency is a good thing in most cases," said Skalicky, whose $1.5 billion-asset company has bought failed banks in six deals with the FDIC in the past year. "It is interesting to see what other banks go for, and it is good to find out how many people are bidding and how much," he said. "That is valuable information," though "it isn't the be-all, end-all. It's just another factor to consider."

In May the FDIC stopped its decades-long practice of revealing the names of losing bidders and the details of their bids, without offering any explanation.

This week the agency said it plans to start releasing information about the losing bids again, but not to the same extent as in the past.

The second-best bid, also known as the cover bid, will be withheld for one year.

The names of all the losing bidders, including the one that made the second-best bid, will be available publicly following the failure of the bank, but will be decoupled from their bids. So it will be unclear who bid what.

The agency also will begin making a new disclosure: its rationale for picking the winning bidder. FDIC spokesman David Barr could not specify when the bid information would become available, but said he expects it to be soon.

Dan Bass, the managing director in the Houston office of Carson Medlin Co., said he considers the changes palatable.

"That is a good compromise," Bass said. "If you know the winning bid and the third-place bid, you can guess the midpoint between that as a proxy. It helps you get an idea of what is going on."

But some observers were disappointed that not all the bid information would be disclosed, as it had been historically. They also questioned why the FDIC would want to withhold the runner-up bid for a year.

"Any information is better than no information," said Randy Dennis, the president of DD&F Consulting Group in Little Rock, which helps banks with formulating bids for failures. "But I hate for us not to be able to get full bids."

Ken Thomas, an independent bank consultant and economist in Miami, said he worries that withholding information could undermine confidence in the FDIC.

"We are in an environment now where there is an increasing distrust of government in general," Thomas said. "The way to handle that is increased transparency."

Barr said the FDIC is withholding the runner-up bid for a year "so it doesn't adversely affect the bidding process at this time," but he could not elaborate. He said the FDIC has the legal authority to do so under Exemption 4 of the Freedom of Information Act.

That exemption allows a government agency to withhold commercial or financial information obtained from a person or company, if the information is considered privileged or confidential. "Case law interpreting the exemption allows the FDIC to withhold the disclosure if it is likely to cause a program to be rendered ineffective or inefficient by the release of the information," Barr said.

But some observers questioned how the FDIC might defend that position in court.

Ron Glancz, a partner at Venable LLP and a former FDIC assistant general counsel, said he is puzzled by the agency's interpretation and application of the law.

"I don't see how you can distinguish between 2, 3, 4, 5 and 6 in the bids," Glancz said. "I daresay somebody is going to challenge it. It is going to be difficult for them in terms of the case law to somehow justify about why they are hurt more if they release the runner-up, versus releasing it all."

Skalicky, the banker, speculated that the agency might be deferring release of the cover bid to help a winner who pays significantly more than the second-place bid save face. "It could be embarrassing if you were way out of line with everybody else," he said. "That is probably why they don't want to publish it."

But regardless of the reason, most industry watchers agreed the information is important to the bidding process and in oversight of the FDIC's role in resolving failed banks, especially given the public interest in the reported deficit in the Deposit Insurance Fund.

Thomas said a lack of transparency about the bids is all the more questionable given the deficit.

"This seems a step backwards, especially now that the FDIC is technically insolvent," he said. "They should be leaning more towards transparency here."

At the end of the third quarter the FDIC's insurance fund had a deficit of $8.2 billion. It is the second time the agency has had a deficit, with the first being 1992, during the savings and loan crisis.

Barr, the FDIC spokesman, said while it does have a negative balance, the agency still has $38.9 billion on hand to deal with failed banks and can also use a line of credit with the Treasury. Barr also pointed to $45 billion that is expected to come from banks' prepayments at the end of the year.

Thomas, who has collected the bids for failed banks for more than a decade using FOIA requests, said that if the FDIC does not fulfill his pending requests in full, he would go so far as to challenge the decision in court.

"Why did they pick a year? This is important information that we need to know," Thomas said. "More information means a better marketplace and better bidders and a better result."

But William Isaac, who was the FDIC's chairman in the early-to-mid 1980s, said the agency should not release any of the information on the bidders who did not win.

"I think the element of uncertainty is helpful to the FDIC," Isaac said. "If a bidder believes there aren't many viable bidders, they won't put much on the table. If they think it is just them and one other bank, they won't be aggressive. The way to keep people aggressive is to create some uncertainty in their mind."

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