The SEC is sick and tired of hearing that it supposedly messed up by falling asleep at the switch ahead of the subprime crisis. And now everyone is going to have to pay. We know the White House’s top economist also is on the case (Edward Lazear, chairman of the Council of Economic Advisers, is saying the U.S. is “not in a recession” and that "the data are pretty clear”) but no one is listening. A look at what investment banks likely will be forced to do differently in the future.

The Securities and Exchange Commission is pressuring investment banks to publicly disclose details of their funding levels after the second quarter, the agency's first step to increase disclosure in light of the collapse of Bear Stearns Cos.

SEC Chairman Christopher Cox said in a speech Wednesday that the four largest investment banks overseen by the SEC will disclose "actual capital and liquidity positions...in terms that the market can readily understand and digest."

Investment banks provide liquidity information in their quarterly reports. The SEC is pressuring investment banks to expand that and to include information about their funding, including capital ratios. The agency also will push brokerage firms to break down the capital ratio into greater detail, including risk-weighted assets and credit exposures.

The four largest investment banks would have had to eventually increase disclosures to comply with the Basel II banking standard, created by 10 of the largest nations who are members of the Basel Committee on Banking Supervision. The SEC's pressure and the market environment are speeding up that process by a year.

Commercial banks disclose capital ratios but under an earlier Basel standard. Some investment banks had been pushing for the use of risk-weighted assets because they felt it more accurately described their leverage.

Mr. Cox said the disclosures would begin after the second quarter, and additional information about concentrated exposures within the investment banks would be phased in later.

While the SEC has said rumors contributed to a run on Bear Stearns -- not problems with its capital -- the agency hopes disclosing more information about the financial health of investment banks will restore confidence to investors and counterparties in the market.

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