'Secret' agreements for running Citigroup and Bank of America

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Most investors in Citigroup (C) and Bank of America (BAC) probably assume that the relationships between the banks and regulators are fully disclosed. Well, think again.

Separate reports say that both financial firms have or will have confidential agreements with the government about how they can operate. The Wall Street Journal reports that "Bank of America Corp. is operating under a secret regulatory sanction that requires it to overhaul its board and address perceived problems with risk and liquidity management."

The newspaper writes that Citi and the FDIC are close to a "memorandum of understanding [that] gives banks a chance to work out their problems without the glare of outside attention."

It is odd that the banks have not disclosed these deals to shareholders. They would certainly be considered "material" information, which could have an effect on stock value.

One of the most troubling things about bank regulations since the credit crisis is that public companies are being run in private rooms in Washington where management policy is dictated behind closed doors. The government may have made large investments in Citi and B of A to save the firms from collapse, but the banks still have public shareholders. And those shareholders have a right to know what significant measures the government has taken so that they can decide if they still want to hold the stocks.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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