"SECRET" AUCTIONS

Those bond auctions I mentioned below aren't transparent. According to Bloomberg, the SEC is thinking about requiring greater disclosure in an effort to improve market efficiency and more importantly, investor confidence:

Providing more information on auctions, such as the amount of bids and sale orders, might help the market because it ``could allay some investor concerns about getting stuck holding a security,'' said Joseph Fichera, chief executive officer of Saber Partners, a New York-based adviser to local governments.

The staff at the Securities and Exchange Commission has talked with the board about enhanced disclosure of the auction process, Hotchkiss said.

As recently as 2006, the banks have been able to unfairly use their insider knowledge to use the auctions to their benefit:

The board began looking at ways to increase auction-rate disclosure at the request of the SEC, which in 2006 fined 15 banks a total of $13 million for using inside information to submit bids on auction-rate securities.