Who Will Guard The Guards?

A Globe editorial today (4/28/2010) commenting on “Financial Reform” questions, among other things, whether the bill under debate ought to “create a (financial system) consumer protection agency”, adding, “We thought we already had several of those.”  This is a point well taken.  (Makes so much sense it might have been written by an engineer!)

The Securities Exchange Commission is an independent, bipartisan agency created in the wake of the Great Depression and administered by five Commissioners appointed by the President for laddered five-year terms.  Independence is ensured by the fact that the President cannot fire the Commissioners.  The SEC has a staff of 3,800 well-paid employees.

What was the SEC doing when the derivatives-market was being exploited by Goldman-Sachs and others?  As we all know by now, some of them were paying attention to, ahem, certain distractions on the internet instead of doing their jobs.  This is so incredibly flagrant that I am wondering why the Senate isn’t grilling the SEC instead of the Gordon-Gekko-Goldman executives who, like deer caught in the headlights, can’t seem to understand what the problem is.  Greed IS good, isn’t it?

Actually I find it hard to blame them.  After all, they were playing the game by the rules as they saw them and seem quite proud, smug really, that they played so well.  These hearings amount to “round up the usual suspects” in my opinion, and are likely to have about as much effect.  It is political theater at its gamiest.

The derivatives mess that almost brought down the entire world financial system wasn’t the only SEC fiasco – there was Bernie Madoff also, not so big but equally blatant.   The SEC was warned year after year but took no action.  Distracted again, oh my.

So, why isn’t the SEC on the senate hot seat instead?  Maybe it’s the independence angle: we can’t punish them administratively, so forget it?  Or maybe it is the symbiotic relationship  that the civil service has with Congress.  It is through them that legislative decisions are executed. This problem is at the heart of the Roman phrase, “Quis custodiet ipsos custodes?”, or “Who will guard the guards themselves?”  While politicians come and go it is the entrenched bureaucracy that knows the ropes and holds bedrock power in the federal government.

The Globe is right, creating a new consumer protection agency doesn’t make any sense, but creating more bureaucracy is the classic fix for bureaucratic bungling.  When the CIA blew it big time in reporting that Saddam had WMD’s, Congress decided not to chastise or reform the CIA but to create a whole new layer of bureaucracy for the Intelligence community with a Director of National Intelligence.  The DNI, with 8,000 new bureaucrats, promptly became the CIA’s administrative adversary.  From recent reports it appears that the CIA is prevailing, having won a ruling that its station chiefs would outrank DNI personnel on-site.  Some fix.

Another such “fix” was the creation of the Department of Homeland Security with its own gaggle of new public servants, layered and insulated from the rest.  This was a GOP remedy for the 9/11 disaster.  Look everybody, we’ve done something about the problem!  But what they really did was further water-down responsibility and accountability.  (For more on that, please see my post on “Accountability”.)

Well, I think I see a pattern here.  What is the bottom line?  If put on my engineer hat and I were to plot this trend, and if one assumes it is curvilinear, I think I can predict what the future will look like.  All Americans will be in the civil service and the work force will consist entirely of illegal aliens.  Wait, that doesn’t seem too feasible.  I think Chaos Theory is the more applicable algorithm.  I’ll get to work on that.

Enough humor, this is too serious.  My bottom line?  Government is too big.  Solutions are solicited.  Please don’t suggest another government department.

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
This entry was posted in Ethics / Morality, Federal Government, Fiscal Policy, Politics and tagged , , , , . Bookmark the permalink.

5 Responses to Who Will Guard The Guards?

  1. Jim,

    Thought-provoking post. I agree with your concept of “tribes.” I believe the reason people join and are loyal to a tribe is that it provides then with an identity — a sense of self. As a result, when you attack an individual’s religion, country, etc, you are ultimately attacking the person.

    However, I disagree with your claim that America is somehow the “anti-tribe.” To be sure, we are accepting of other beliefs and cultures — to a certain degree. Many countries, even Muslim ones, have Jews, Christians and Muslims living together in peace.

    But America and American identity are a strong source of tribal loyalty. A nation can both tolerate cultural diversity and yet have a single, dominant culture.

    American culture emphasizes values such as democracy, capitalism, wealth and Christian morals while at the same time demonizing others. For example, a Muslim, atheist or communist would never dream of running for president of the United States.

    In my opinion, tribalism offers very little. It is instinctual and it is dangerous. The larger and stronger the tribe, the greater the threat. Therefore, tribes such as America pose the greatest threat.

    Like

    • Jim Wheeler says:

      Gee, that’s strange. Your comment came in under the heading of the post I made a few minutes ago, not the one you are addressing. Oh well.

      When I called America the Anti-Tribe I was referring not to our culture per se but to our Constitution-based ideals of tolerance, including the prohibition against the establishment of a state-approved religion. Just because we fail to live up to that ideal doesn’t mean its promise is dead.

      I do not see tribalism as an option. It is inextricably a part of human nature.

      As to tribal size, I still feel that all “tribes” below the level of the national ideal referenced above have the potential to be problematical, whether they be large (the Confederate States of America, e.g.) or small (McVeigh’s militia).

      It is nice to meet you, if only in hyperspace. Thanks for the reply.

      Jim

      Like

    • Jim Wheeler says:

      Jessica,

      Because of your misunderstanding of my post regarding America as the Anti-tribe I have edited it to clarify, hopefully. I placed the edit part in bold, (which practice I intend to follow for future edits in the conceit that these may have some lasting value). Again, thanks for your input.

      Jim

      Like

  2. Duane Graham says:

    Jim,
    Funny, but there are some things you have written here that I can agree with. You’re right, it’s not necessarily a lack of government bureaucracy that is the problem in many cases, the intelligence apparatus a good case in point.
    However—you’re not going to like this—as far as regulatory agencies like the SEC, if you examine the history of Republican/conservative governance, beginning with the old Interstate Commerce Commission in 1887, they have effectively used such agencies to give the public the comfort of believing someone was watching what was going on while in effect they were using the agencies to actually protect the very industries they were supposed to be regulating.
    If I may, I will quote at length Thomas Frank, whose book, The Wrecking Crew: How Conservatives Rule, is a good read and documents profusely the lack of will on the part of Republicans to seriously regulate businesses. In an interview with Kai Ryssdal at Marketplace, he said:

    Everyone agrees that the financial sector needs a regulatory overhaul in the aftermath of the recent disaster. But the reason our banking regulators napped through the housing crisis is not merely because of confusing jurisdictions. It’s also because of the kind of people who were chosen for the job. They were asleep at the switch because industry wanted them to be sleep.
    Now, the reason for that is simple: There are enormously powerful institutions in America that don’t want to be regulated. Regulation cuts into their profits. And they have used the political process to sabotage, capture, defund, or undo the regulatory state since the very beginning.
    The first regulatory agency, the Interstate Commerce Commission, was set up to regulate railroad freight rates way back in 1887. Immediately thereafter, a prominent railroad lawyer came to Washington as attorney general. His former boss asked him if he would kill off the hated Commission. His response, I think, should be on display in the National Archives next to the country’s other great founding documents.
    This is what he said: “The Commission is, or can be made, of great use to the railroads. It satisfies the popular clamor for a government supervision of the railroads, while at the same time that supervision is almost entirely nominal. The part of wisdom is not to destroy the Commission, but to utilize it.”
    And so it has been, on and off, ever since. A FDA run in the interests of Big Pharma. A Labor Department that apparently thinks its mission was to police workers’ organizations. And, of course, banking regulators who posed for pictures with banking lobbyists, holding a chainsaw to a pile of regulations. Let WaMu do whatever they want. Smiles all around.
    Look, the problem with bad regulators is a political one, not merely a structural one. And President Obama can’t solve it by ignoring it. To counter industry’s endless effort to undermine regulation we must have an informed and maybe even an angry public. Obama needs to tell us what happened and why, and prepare us to remain vigilant even after the crisis has passed.

    Speaking as one sympathetic to Democrats, I don’t think Democrats make this point often enough or forcefully enough. In fact, they need to make the further point that not only are Republicans generally hostile to government regulation, but while in power they frequently place people in government agencies who are openly hostile to the missions of those agencies.
    Duane

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  3. Jim Wheeler says:

    Duane,

    I am not at all surprised at the examples of biased regulation you provide and I’m sure many others abound. However, it so happens that the law setting up the SEC requires that the Commissioners be balanced by party affiliation at a 2/3 ratio at any one time. (3/2 is OK too – don’t get excited.)

    The point in my post was not that we can trust the SEC (or other regulatory agencies) to do their jobs, but really just the opposite. I am recommending we hold them up to public scrutiny, and in this case, ridicule, for the way they let the country down. Now I don’t know which party set the guidelines the SEC follows or whether the other party changed them, but I do know that they did not include watching porn all day or ignoring reputable sources trying to report Bernie Madoffs.

    Maybe, just maybe, if the five Commissioners got in the TV hot seats too, then the SEC IG (where was he the last 10 years?) and everyone else, including the media, might pay more attention to what’s going on.

    Reminds me of a previous discussion wherein we mused at to whether it was proper for the Supreme Court justices to appear in public at the State of the Union address. I thought it was a good idea just to give the 9 a reminder that there is a real world with real people in it out here. The SEC birds need to turn off their computers once in a while and get out more too. Can’t hurt.

    Jim

    Like

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