We wouldn’t want the public to know

Investors seeking higher returns often have to decide whether they’re willing to place their capital at higher risk. But it shouldn’t be the role of government to deprive would-be investors of readily available information that would help them gauge that risk more accurately.

A key source of financing for developers in Southern Nevada has been short term loans, often called “trust deeds,” that can yield double-digit interest rates — three times the typical return on federally insured bank deposits.

But placing money with firms that broker such financing has its risks. Several such private lenders have collapsed in recent years, amidst allegations of fraud and mismanagement.

USA Capital, for example, failed last year, owing $966 million to 6,000 investors. Some of those investors are still waiting to recover some of their money.

Fortunately, a government entity called the Nevada Mortgage Lending Division is required by law to examine the financial records of such private lenders on an annual basis, rating those lenders from 1 to 5, with a “1” being the healthiest rating. Presumably, investors might prefer to place their money with firms that have the best ratings — or, at least, demand a higher return for the higher risk of dealing with a firm with a less impressive rating.

But only if one assumes the reason the Legislature funds that office to gather that information is so that it can, you know, make it available to the public.

The Review-Journal on June 7 requested the results of the most recent such financial examinations. Mortgage Lending Commissioner Scott Bice dropped the request into an envelope — asbestos, perhaps? — and sent it on to the attorney general’s office. Deputy Attorney General Richard Dreitzer then dutifully responded with a July 23 letter saying this information — gathered at taxpayer expense, presumably because someone at the Legislature thought it might prove useful to members of the public — is secret. No one can have it.

The state public records law is clear — the default setting is that all public records must be open to the public. But the busy Mr. Dreitzer found a loophole in the law — a provision that proprietary information revealed by a private entity can be kept secret if revealing it might give a competitor to that private company a “competitive advantage.”

That provision was put in the law to protect legitimate business secrets — keeping firm A from discovering precisely what firm B has bid for a job, so firm A can underbid by one dollar, that kind of thing.

But Mr. Dreitzer rationalizes that disclosing which firms have done better or worse on their exams might give some competitor “an advantage.”

Well, yes. Reporting that a given convenience store is subject to nightly stick-ups might make customers less likely to shop there than at one that’s not so bedeviled. Reporting that the patients of one particular doctor all seem to die under his knife might “sway patients toward or away from” his practice. Will the attorney general’s office thus decree that information gathered by government agents about armed robberies and medical malpractice must also be kept secret?

Not only that, Mr. Dreitzer even has the nerve to say revealing this information might “adversely affect” the public because the “material, whether positive or negative, might sway consumers toward or away from a particular entity.”

Thank heavens no one asked Mr. Dreitzer whether it would “adversely affect” bathers to tell them a great white shark had been spotted 50 yards offshore.

Armed with Mr. Dreitzer’s hare-brained letter, Mr. Bice now says he would love to disclose the lenders’ grades, but is prohibited from doing so by “state law.” Assemblyman Joseph Hogan, D-Las Vegas, introduced a bill last year that would have made it clear the grades on the financial exams are public information, but that bill died in committee, Mr. Bice notes.

Investors can complain to Mr. Bice all they like — providing they get it done by today. For Mr. Bice has submitted his resignation effective Tuesday, you see, so he can establish a mortgage lending department for a Town & Country Bank.

On the bright side, the attorney general’s office says staff there may review Mr. Dreitzer’s work, once Mr. Bice is gone.

Will they find the law is different on Wednesday than it is today? We’ll see.