Among the problems of government central planning is that the segment of society that is apt to make decisions that skirt the rules is the same one that must enforce them. Take, for instance, information that’s coming out as a result of Bank of America CEO Ken Lewis’s testimony to New York Attorney General Andrew Cuomo. Lewis and the bank’s board failed to fully inform shareholders of material circumstances during the run-up to the merger with Merrill Lynch, which is in violation of securities law.
Complicating matters is that government officials, prominently former Treasury Secretary Henry Paulson, appear to have forbid the transfer of that information.

“Everyone involved knew that was a clear violation, that’s material non-public information, so basically we just closed the rule book during the crisis and said we don’t care, we need to keep the lights on, and we’ll deal with that manana,” [portfolio manager Peter] Sorrentino said. “Logic went out the window and they were just acting out of fear,” he said. It was “completely panic mode.”

The shadow lengthens:

Lewis testified that he asked Federal Reserve Chairman Ben S. Bernanke to “put something in writing” regarding the U.S. government’s plan to support Bank of America’s acquisition in view of Merrill’s mounting losses.
After Bernanke said he would consider the idea, Paulson called Lewis and said, according to Lewis, “First it would be so watered down, it wouldn’t be as strong as what we were going to say to you verbally, and secondly, this would be a disclosable event and we do not want a disclosable event.”
Attached to Cuomo’s letter Thursday was a Dec. 22 e-mail from Lewis to his board. “I just talked with Hank Paulson,” the e-mail says. “He said that there was no way the Federal Reserve and the Treasury could send us a letter of any substance without public disclosure which, of course, we do not want.”

Plainly and simply, public officials should not be making promises to private institutions concerning public money with the explicit instruction that the public shouldn’t know. Much like the trend for all of the laws, debts, and obligations of lower levels of government to flow back toward the broadly diluting sea of the feds, as well as the financial recklessness resulting from the implicit backing of Fannie and Freddie loans, backroom deals will erode responsibility in the private sector, insulating its actors and solidifying an untouchable class that cuts across the two sectors. The line of conflict will shift from public vs. private to elite vs. everybody else.