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.