Who will work for the super-regulator?
TEXT OF COMMENTARY
KAI RYSSDAL: Sometime next week the Obama administration’s going to share its plans for making sure what’s been happening to the financial industry never ever happens again. Treasury Secretary Timothy Geithner will roll out the blueprints for a super regulator, government agency that’s supposed to spot systemic risk and head it off.
Commentator Susan Lee got to wondering what kinds of people it might be good for that agency to hire.
Susan Lee: Well, let’s approach this question in the negative.
For starters, not lobbyists or politicians. Neither group has the right prudential temperament or the right ethics. And lawyers are surely out of the running. Just look at the tons of lawyers at the SEC — none of whom were able to spot the current crisis until it was upon them. And probably not guys from Wall Street. Granted, there will be lots of suits eager for a job — but hiring them would create, almost instantly, regulatory capture.
That’s the not uncommon event when regulators ignore the public interest to advance the interests of the folks they’re regulating. It’s unreasonable to expect a former Wall Streeter, who has spent years denouncing regulation, to change his or her spots.
Come to think of it, super-regulators can’t be too young, or they’ll have their caps set on a nice job in the financial industry when they leave public service. That’s regulatory capture in the making. And they can’t be too old, or the government will have to pay out the wazoo to match their giant salaries.
Academic economists aren’t good candidates, either. They have big brains, sure, but lack the nitty-gritty experience of trading markets or even recognizing accounting dodges.
This leaves one more group of possibilities — bureaucrats. But this group can be disqualified on grounds of proven incompetence. None of the bureaucrats, belonging to dozens of public agencies, were able to even identify one of the many causes of the current crisis.
What’s the net-net? There are no obviously attractive candidates to staff a super-regulatory agency. In fact, this little exercise is a good demonstration of why the idea is a bad one. The job is impossible.
And it will generate the worst of all worlds: We’ll have a new regulator that will give the illusion of protection. And that illusion will create the optimum conditions for the next crisis.
Ryssdal: Susan Lee is an economist living in New York City.
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