Long-time bank hater Peter Eavis seems worried that banks aren’t adequately disclosing their legal reserves: As these legal threats loom, the nagging question is whether the banks have properly girded themselves for the payouts. The banks are supposed to build up a financial cushion in advance to absorb the estimated cost of the payouts. Knowing the size of this cushion, called the litigation reserve, is extremely important to outsiders trying to weigh the financial strength of banks. For instance, if a bank’s litigation reserve turns out to be much too small for the agreed-to settlements, it could call into question the strength and management of the bank. Yet most banks are not disclosing the overall size of their litigation reserves. That has left investors and analysts groping in the dark. “I definitely feel that the disclosures around this aren’t great,” said Richard Ramsden, a bank analyst with Goldman Sachs. [Emphasis added.] Goldman’s Ramsden (who doesn’t actually invest money for a living) might prefer more disclosure in this area; as for me (who does) I’m fine as is.You can surely guess why: the more a bank tells the world how much it’s put aside in legal reserves, the more of a disadvantage it puts itself at as it tries to negotiate settlements. Disclosure simply gives the other side a sense of the real, final number the bank has in mind. Why let ‘em know? Duh! I put down Eavis’s silly complaint as yet another instance of what happens to people’s brains after they’ve spent too much time worshiping at the altar of Wall Street’s new favorite virtue: Transparency. Always and everywhere, the thinking seems to be, more transparency is better than less. I don’t buy that. Rather, I’d just as soon that companies I own keep certain information to themselves when they can. Exactly how they’re spending their marketing dollars, say, or precisely where the R&D budget is going. As with litigation reserves, too much disclosure can give competitors and adversaries an unneeded advantage. Why supply it? Besides, there are other ways besides poring over a company’s filings to get a comfort level with certain risks. (Regular company visits help a lot more than most people realize.) In the meantime, this fixation that people on Wall Street seem to have for disclosure for the sake of disclosure can be a bad and costly idea. What do you think? Let me know !