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Many who crafted regulations after the 2008 crisis now work for Wall Street

183 points by Dowwie 8y ago

chollida1 8y ago
I mean the man who wrote the CBA for the NHL owners now works for the Toronto Maple Leafs. If you were regulated and you had to hire someone to help you understand what you are and aren't allowed to do by these regulations wouldn't the first person you look to hire be the person who actually wrote the rules? > Seventeen of the 40 most senior staffers who served on the House Financial Services Committee in August 2008, as well as 15 of the 40 senior staff who served on the Senate Banking Committee at that time, later joined or took jobs representing a large financial institution. So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? People get angry when tech companies try to limit people mobility, you really have to work hard to contort your view to see this as being any different. Most governments actually spend alot of money on programs to get people from private industry to do a year stint with the government and then go back to private industry. They do this because everyone sees value in people moving from government to private industry. If you are against this what measure would you consider to be fair that doesn't limit a person's mobility, wrt work, and helps get people who worked in government into private industry.
- jessaustin 8y ago
  ...the man who wrote the CBA for the NHL owners now works for the Toronto Maple Leafs. How is this at all relevant? He used to work for a business association, now he works for one of its members. Get back to us when the NHL causes the economy to collapse, and then gets bailed out so that it is guaranteed to do the same thing again... Also, Leafs suck.
  - quxbar 8y ago
    Apparently it's the role of NHL to protect us from the predatory nature of hockey teams. :P
- jondubois 8y ago
  >> If you were regulated and you had to hire someone to help you understand what you are and aren't allowed to do by these regulations wouldn't the first person you look to hire be the person who actually wrote the rules? That's just the kind of story that people tell themselves and others while they're making a ton of money by screwing over society; that way not only can people get rich doing horrible things, but they can also look their victims straight in the eyes and smile while they're doing it. It's a win-win! (in the sense that one side gets to win twice).
  - MrEfficiency 8y ago
    The mental gymnastics in OPs post are classic government apologists. Instead of criticizing the system, they find an excuse to propagate it. I dont have a solution, government is a beast that can barely be controlled. Voting and politicians seem like they have power, but the employees are often entrenched and reinforced by the winners of the current system.
    - lovich 8y ago
      Not everyone views government as a purely negative
  - pc86 8y ago
    You're right, it couldn't possible be that some people actually have good intentions and want to do good work for a good salary utilizing their decades of expertise in incredibly complex and ever-changing topics.
    - jondubois 8y ago
      It's incredibly complex and ever-changing for a reason $$$.
      - tikkabhuna 8y ago
        Regulations are ever changing because regulators want the market to be a certain way and companies will look to innovate and sometimes this is in a way the regulator doesn't believe is in people's best interests. If you look at MiFID 2 that came into effect at the start of this year, it cost financial companies significant amounts to comply. Many of these companies would prefer it didn't exist. Others have identified opportunities from the changes that they can use (Dark pools being less prevalent and the rise of Systematic Internalisers). Its complex because there are lots of moving parts and regulators want to keep the market in check without having undesired consequences.
- retube 8y ago
  Yeah. we hire ex regulator employees cos we are trying to comply with regs, not beat them. regulations and regulatory feedback can be hard to understand, use arcane language, and may be apparently inconsistent. having people who can interpret and advise is very useful.
  - justaguyhere 8y ago
    having people who can interpret and advise The solution here is not to hire those who wrote those regulations at massive salaries. The solution is to write the regulations that is easy to interpret by those for whom it was written in the first place! This is like me writing un-maintainable, insane code that only I and I alone can understand and nobody else, just so I can keep my job! This would be the fastest way for me to get fired. But somehow this is the norm in law and regulations?
    - hndamien 8y ago
      English is apparently a horrible language for writing law. Especially bad for reading it.
      - justaguyhere 8y ago
        I wonder if this is the case in other English speaking countries like England, Australia etc? This sounds like a flimsy excuse...
        hndamien 8y ago
        I was half joking, like people talking about programming languages. Legal docs just aren't very user-friendly have pretty large attack surfaces due to language.
    - sct202 8y ago
      I think the challenge with regulation is that it is infrequently revised, so imagine you have to write code that is works and also cannot be edited for 10 years. It's a long time, so if you happen to over specify your regulations, you might end-up creating a giant loophole that will be open for years. If you under-specify it, you end up with a lot of uncertainty over what is or isn't included. Having been on the receiving end of a lot of safety and environmental regulations, I would have appreciated more specific guidelines, especially with the number of meetings I had to go to where we would internally try to justify if our decisions were going to violate something or not.
- xg15 8y ago
  > They do this because everyone sees value in people moving from government to private industry. Who is "everyone"? The risks this opens for biased decision making or straight-up corruption are well-known.
  - pc86 8y ago
    Are you suggesting that we have college grads choose "government" or "private sector" and they're not allowed to switch after that?
    - mattnewton 8y ago
      He’s suggesting the risks of regulatory capture when the people you are regulating can offer you a cushy job after your term are great and unaddressed by gp’s naive model.
      - bobwaycott 8y ago
        I believe you meant naive.
        mattnewton 8y ago
        Yup, fat fingered it, thanks.
- fipple 8y ago
  Harry Truman would have been waiting for the punchline. He had no money, but he thought he shouldn’t denigrate the office of President by writing books or cashing in with a corporate gig. Medicare was partly passed to get him health insurance! Yeah, it was a long time ago.
  - TangoTrotFox 8y ago
    Engaging in actions after office that would suggest behavior while in office could have been 'for sale' is really quite a new concept. It only started with Gerald Ford [1] in 1977. Quite amusing. The banks engaged in extremely reckless behavior that caused immense suffering to millions and devastated the world economy, yet exactly 0 individuals faced any personal accountability. And then the president gets out of office and goes to give speeches on Wall St. at $400k a pop. Oh yes, and Eric Holder the former president's Attorney General who also chose not to give any consideration to prosecution, simply resigned and immediately returned to Convington & Burling -- a law firm who had as clients many of the banks responsible for the financial crisis. --- Quite fortunate for establishment politicians that Americans are so divided. Instead of focusing on events like this, we instead attack each other. In a two party system so long as you make people hate and fear the alternative enough, it doesn't matter what you do - since you can safely rely on people resigning themselves to 'Well.. it's better than the alternative.' It's almost like politicians might have even realized this and are utilizing division of people as a tool to ensure the perpetuation of the current political class... [1] - https://www.thoughtco.com/former-presidents-speaking-fees-3368127 https://www.thoughtco.com/former-presidents-speaking-fees-33...
    - j-c-hewitt 8y ago
      It's not a new concept historically speaking. It just runs counter to contemporary, generally Progressive (as in early 20th century Progressive vs. modern progressive) ideals of republican virtue. Offices being for sale and run for profit is the old way of doing things both in the US and around the world. America's laws are generally supposed to prevent it because it has been the natural tendency for government offices to be spoils.
- gaius 8y ago
  A one-way hop is probably fine. A revolving door is not.
- qubax 8y ago
  > So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? Sure you can. But you shouldn't be regulating the companies you hope to work for. If these people were angling to get cushy jobs for large banks, don't you think there is a conflict of interest there? And if you were large banks, wouldn't you tell these regulators you'd love to hire them for their "expertise" so that you get preferential treatment? If you think these people were hired for their "expertise", that's naive. It's rewarding regulators for working for the banks interests and it's a signal to future regulators that they also will be taken care of if they "do the right thing". Think about it. If you were going to regulate facebook, do you think it is smart to stack the regulatory board with people who want to work for facebook after the regulation is created? Don't you think that's a conflict of interest?
  - tikkabhuna 8y ago
    If banks were leaning on current regulatory employees whilst they were still employeed, that sounds like bribery and should be already covered by existing laws. Remember that there are many banks and that all regulation covers them (although certain bits focus will hit them in different ways). Also, regulation goes out for review before it gets passed. If a certain bank was pushing for regulation to specifically benefit them, others would raise it. I know of people who worked at the European Securities regulator. Some were seconded from PwC/EY/etc because they get knowledge share. Regulators can learn from people in industry, those in industry learn about the "spirit of the law". With the recent MiFID 2 regulation in Europe, areas were left vague so that the regulators could expand the definition based on whether they thought it was needed. European financial regulators have moved towards principles[1], over rules, so that they are not constrained when a firm does something that breaches the spirit of the law, but not the letter of the law. [1] https://www.fca.org.uk/about/principles-good-regulation https://www.fca.org.uk/about/principles-good-regulation
- x2398dh1 8y ago
  So your argument is, "Self-interested entity A wants to gain something, therefore they should take it." There is absolutely zero substance to what you are saying. You are basically saying, "the strong survive! Yay on strong! Boo on weak!" That is the basis of what you are saying. Then you back it up by saying, "This is the way it has always been done! Timmy jumped off a bridge too, so I should do it!" Did you know that it is completely possible that other Governments are doing things wrong as well?
  - chollida1 8y ago
    There are alot of quotes in your comment, none of them came from anything I said in my original comment. I love good discussion, I find nothing helps form and destroy opinions better. If you'd like to have one I'll participate.
    - jessaustin 8y ago
      Haha if you really loved discussion one would wonder why you chose this particular comment as the only one of a dozen mostly more substantive comments to which you would respond after three hours...
  - oliwarner 8y ago
    Zero substance? The point is that these are experts in their niche of law. That is a highly sought after skill. What is your argument that these people should not be able to use their knowledge of the law? Are they automatically corrupt or something?
    - smolder 8y ago
      They are not automatically corrupt, but they are absolutely and automatically worthy of suspicion of corruption, as doing this revolving door thing is indistinguishable from corruption on the surface. Experts who aren't the authors are the only ones who can safely be assumed not to be corrupt and are therefore the only people who you can allow to be hired if you hope to prevent corruption.
- paulddraper 8y ago
  Exactly. This is very typical. No one bats an eye at a software author consulting on the software. The difference here is that laws are mandatory. But that doesn't change the equation of expertise.
  - s73v3r_ 8y ago
    A software author consulting on software they wrote is a far, far different situation than someone regulating an industry then going to go work for that industry.
- deleted 8y ago
  [deleted]
- mikeash 8y ago
  It’s a major conflict of interest to go from writing the regulations to being paid by the companies you regulated. What if it becomes understood that you get a high salary for an easy job if and only if you write regulations that are favorable to the companies? How do you stop this without limiting fundamental human freedoms? I have no idea. But that doesn’t mean this situation is good or that we should stop pointing out the problems. The lack of a solution does not imply the absence of a problem.
  - yellowstuff 8y ago
    Matt Levine looked into these competing theories and came up with more evidence for the view that harsh regulators get hired by banks more than lax regulators: https://www.bloomberg.com/view/articles/2014-06-26/strict-regulation-makes-the-revolving-door-spin-faster#footnote-2 https://www.bloomberg.com/view/articles/2014-06-26/strict-re...
    - jderick 8y ago
      Was he then hired by a bank? :)
      - graedus 8y ago
        Other way round - he's Goldman alum
    - PurpleBoxDragon 8y ago
      What's the possibility that harsh regulators are hired more to create a kind of regulatory capture. The harsher the regulation, the more you need the expert to know how to navigate it, and the less likely competition will be able to navigate the regulation.
    - abalone 8y ago
      Levine’s stuff is great but this one conflates strictness with complexity. You could have simple regulation which is harsh on banks.
    - 8y ago
- oliwarner 8y ago
  I'm with you but I think the automatic fear is people in power spend that time writing laws that only they understand how to exploit. The scope for meaningful oversight diminishes as the law gets more and more technical. Financial regulation is both extremely technical and tightly wound into money (obviously). I'm honestly not sure how corruption of office laws cover this stuff. It may not be easy to prove that a loophole existed for later exploitation. How would you punish it if (eg) a third party bought that knowledge in good faith and made billions off it?
  - germinalphrase 8y ago
    In a world where a state governor can accept $175,000 in loans, gifts and other personal benefits from a businessman in exchange for arranging “meetings between [the businessman] and Virginia government officials, hosting and attending events designed to encourage Virginia university researchers to initiate said studies, directly contacting government officials in an effort to encourage said studies, promoteing [the businessman’s] company’s products and recommended that senior government officials meet with the [businessman] to discuss how the company’s products might lower healthcare costs of public employees” without being found guilty of corruption - well, I just don’t feel confident we have any ambition as a country to curtail corruption by our political/business community. I understand the legal arguement - but it just doesn’t seem right that that kind of behavior is above board. [0]https://www.forbes.com/sites/insider/2016/07/13/scotus-quid-pro-quo-analysis-in-mcdonnell-may-broadly-affect-bribery-insider-trading-prosecutions/ https://www.forbes.com/sites/insider/2016/07/13/scotus-quid-...
- treis 8y ago
  >So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? The problem is the implicit, or perhaps even explicit, promise of lucrative jobs from regulated companies to those writing the regulations. There's an incentive for the regulators to go easy on these companies in order to get a job after they leave their government jobs.
- y-c-o-m-b 8y ago
  I get what you're saying, but this is a dangerously optimistic view. Does "conflict of interest" mean nothing then? What kind of checks and balances do we have to prevent corruption? A quick google search for those jailed for the financial crisis reveals a tremendous amount of corruption and this looks to be the tip of the iceberg: https://www.channel4.com/news/factcheck/factcheck-how-many-bankers-were-jailed-for-their-part-in-the-financial-crisis https://www.channel4.com/news/factcheck/factcheck-how-many-b...
- sp527 8y ago
  Let's run through a simple iteration of logic 101: if someone knows they can be paid a boatload of money later on by companies they regulate, they will not regulate them in a way that will jeopardize that exit opportunity.
- pesmhey 8y ago
  Many who crafted laws after 1774 revolution work in government afterwards. Disgusting!
geggam 8y ago
And this surprises who ?
- pizzazzaro 8y ago
  Apparently the Libertarians that think such a revolving door is a "good thing for people's careers", but forget about why those regulations exist in the first place.
mr_tristan 8y ago
We have a system that lets legislators manufacture a job specialty for themselves. Out of basically nothing but reactions to serious problems of the past. While it may generally be done in good faith, it still doesn't seem to avoid a tragedy of the commons. We now are building a system so byzantine that nobody wants to operate without a part of their business working to understand public policy. Complexity seems to beget more complexity. While this sort of thing may have "always been done", I sometimes fear that with more tools like machine learning, AI, etc, we are going to just simply compound the rate of complexity growth. And thus we end up with specializations that were completely manufactured. It just seems wasteful.
- nraynaud 8y ago
  > Complexity seems to beget more complexity. it's funny, I see it a lot in software too, people who "write a script to manage/hide/tame complexity". Cool, a new layer to go through when something doesn't work well. On the general issue, it's pervasive at private companies too, where an important problem leads hiring ("this new person will be responsible that it doesn't happen again") and procedures centered around it whatever the cost. Then those companies round up and create a standard around it, and compliance jobs, etc.
kartan 8y ago
> The financial industry showed its might in other debates, as well. In one example, Republicans in the Senate joined with moderate Democrats in 2009 to defeat a plan to allow judges to set new terms of mortgages, a measure that could have also allowed Americans to get more favorable terms amid the housing crisis. This is a very important point. Wall Street is getting power and knowledge directly from the source. Who is defending Main Street needs? > But the effect of the banks’ influence, according to former lawmakers, was to dilute the legislation. This is one of the reasons we get so bad legislation. The original ideas and goals were good. But they get lobbied out of existence. So, I do not know if working for the Wall Street is a bad thing per se to do for legislators once they finish their terms. But the result is an unhealthy economy. And that needs to be addressed.
DanCarvajal 8y ago
Also the sky is blue.
gammateam 8y ago
and I aspire to do the same thing? any 4 year old can see this is an effective way of navigating life and securing access to goods and resources for generations, why do the rest of you guys spend decades acting like this is novel? this is how the whole world has functioned for millenia, you are WAY ahead of yourself if your motive for saying "AHA!" every time you see this is because its not the most ideal way to run an egalitarian society. The biggest newsflash should be that you were sold a false premise of how representation works in this country and the level of influence you get to have everyone that matters for the machinations of the world kind of already gets it?
krupan 8y ago
If this kind of thing bothers you, please help make Bitcoin successful.
DoctorOetker 8y ago
If the financial laws were designed to be machine readable, there would be no need to hire ex-regulators. The refusal to start formalizing law to a machine readable form indicates either incompetence or malice.
- lolsal 8y ago
  You don't think it's possible that 'financial laws' are just a little bit more complicated and complex such that there are more than two possible reasons they are not machine-readable? Lots of laws are up to interpretation which is why we have judges.
  - DoctorOetker 8y ago
    Who cares if its complicated and complex? >Lots of laws are up to interpretation which is why we have judges. What you describe is retroactivity: i.e. in some systems (like Anglosaxon Common Law)- more than in others (like European Civil Law) there is some retroactive legislative power granted to judges, who normally only apply the law and not write or clarify it. This is orthogonal to formalization. I wish to illustrate this by example, but I want to keep my comment as orthogonal as possible to other opinions, since I am not trying to force civil law views on people who prefer common law and vice versa I will describe possible ways of formalizing the comment you made for 3 systems: civil law, common law and direct democracy. It's just an idea, fit or don't fit it in your own ideology as you like. General definitions: - Green zone: actions which are explicitly permitted with ultimately very low probability of retroactive punishment or fine for a perpetrator. - Red zone: actions which are explicitly forbidden with ultimately very low probability of retroactive non-enforcement of compensation to a victim of the action. - Grey zone: actions which are explicitly guaranteed to be retroactively decided upon by the appropriate authority: in the Common Law: either legislative branch or a judge; in a pure Civil Law: the legislative branch; in a direct democracy: a vote or referendum by the people at large, aka trial by democracy (frowned upon, just like stepping in the grey zone). - All cases are decided by a formal verifier, the victim (a company, the state, an individual, ...) presents the formal proof of the defendant's crime in the red zone. Normally the Defendant is unable to formally prove he is in the green zone (an inconsistency in the law). If he is able to present such a proof then the case is decided (and the law is either reformed to resolve this specific inconsistency or kept gray) by forwarding the case to the authority as described in the Grey zone definition. Virtually never should an inconsistency be found. - If an entity is found to have acted provably in the grey zone, anyone can make claims, and they are again brought to the appropriate legislative authority (parliament, judge or public depending on your system of choice) - A budget of say $1M per day for the US (which comes down to less than $2 per capita per year) goes continuously into a growing pot, and anyone is free to explore the machine readable law and construct hypothetical inconsistent situations. If you can find a hypothetical inconsistent situation before it actually occurs to people you spare people misery. The inconsistency that hopefully didn't occur yet is presented to the legislative authority, again parliament/judge/populace. At any rate, the rate at which inconsistencies are discovered tells us something about the quality of laws written, and which laws needs more attention than others. The reward is half the reward pot content, so if one a day is found its $1M, if 10 a day are found $100k if one every 10 days its $10M... This is what I meant with ultimately very low probability of retroactive decisions. - Risk averse entities will stay in the green zone, audacious ones embrace the whims of the legislative branch, which is hopefully more expensive to bribe (with money or jobs) than a regulatory agency: this may be true for a parliament but perhaps less true for a single judge. Bribing the populace as a whole seems uneconomical and ... transparent. - Since each sector has competition, and some actors will remain more in the green zone and other will sometimes risk the grey zone, whenever a gray zone event is tolerated, the green zone companies will complain because their competition got ahead with a gamble, and they will require less and/or smaller grey zones, while the company that was in the gray zone will demand bigger and more grey zones to scare away those that prefer the concept of finality. So basically each sector sees both forces that vote for finality and also forces that vote for retroactivity. Most will probably demand finality. Now grey zones can expand and contract, if 1) they keep expanding indefinitely at some point there is no law and we are judged entirely ad hoc by parliament/judges/populace, or 2) they settle on a specific extent and staying in the green or going in the grey is a personal choice or 3) society (industry and or population) starts demanding laws without or at least with smaller and smaller grey zones, and the process is encouraging formalization of all law. So retroactivity can be formalized without neccessarily devolving in ad hoc decision making. It's the same confusion as between determinism and formalization: an indeterministic finite state machine can still be formalized. So yes I still think its incompetence or malice. (today you can't even prove that you are in a green or red zone, in the system I just described you can at least verify such proofs if you can generate them)
smsm42 8y ago
How else could it be? To craft regulations in the field X, you need experience in the field X. That means, you must have worked in the field X, and probably doing something worth mentioning, otherwise what kind of experience would it be? Then, after you are done crafting regulations, what else you would be doing? I mean, you could just drop everything you know and start a new career, but it'd be weird to expect that happen in a majority of cases. I am actually surprised that's only 30/40 percent (maybe some of the staff weren't actually domain specialists but did something else). Most of the time, you could stay in the government for a while, but then you'd might move on to work in the field X again (might not, but everybody can't work work the government - I hope not). So the article sounds like "people with law degrees work as attorneys!" - yeah, thanks, Captain Obvious, you never disappoint. Now, I can see what people can be worried about - that the insiders of the industry would craft regulations in self-serving ways (also known as regulatory capture). The thing is, this is something that follows from the very nature of the thing - unless you want a highly technical field to be regulated by people who have no idea what's going on (not that it could happen in our politics, oh no sir, never!) you have to solicit help from the insiders and rely on their opinions. And then those insiders wouldn't just retire happily, having served their country, they'd continue being insiders with their own self-interest. We should stop being surprised about it.

183 points by Dowwie 8y ago

I mean the man who wrote the CBA for the NHL owners now works for the Toronto Maple Leafs. If you were regulated and you had to hire someone to help you understand what you are and aren't allowed to do by these regulations wouldn't the first person you look to hire be the person who actually wrote the rules? > Seventeen of the 40 most senior staffers who served on the House Financial Services Committee in August 2008, as well as 15 of the 40 senior staff who served on the Senate Banking Committee at that time, later joined or took jobs representing a large financial institution. So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? People get angry when tech companies try to limit people mobility, you really have to work hard to contort your view to see this as being any different. Most governments actually spend alot of money on programs to get people from private industry to do a year stint with the government and then go back to private industry. They do this because everyone sees value in people moving from government to private industry. If you are against this what measure would you consider to be fair that doesn't limit a person's mobility, wrt work, and helps get people who worked in government into private industry.

jessaustin 8y ago
...the man who wrote the CBA for the NHL owners now works for the Toronto Maple Leafs. How is this at all relevant? He used to work for a business association, now he works for one of its members. Get back to us when the NHL causes the economy to collapse, and then gets bailed out so that it is guaranteed to do the same thing again... Also, Leafs suck.
- quxbar 8y ago
  Apparently it's the role of NHL to protect us from the predatory nature of hockey teams. :P
jondubois 8y ago
>> If you were regulated and you had to hire someone to help you understand what you are and aren't allowed to do by these regulations wouldn't the first person you look to hire be the person who actually wrote the rules? That's just the kind of story that people tell themselves and others while they're making a ton of money by screwing over society; that way not only can people get rich doing horrible things, but they can also look their victims straight in the eyes and smile while they're doing it. It's a win-win! (in the sense that one side gets to win twice).
- MrEfficiency 8y ago
  The mental gymnastics in OPs post are classic government apologists. Instead of criticizing the system, they find an excuse to propagate it. I dont have a solution, government is a beast that can barely be controlled. Voting and politicians seem like they have power, but the employees are often entrenched and reinforced by the winners of the current system.
  - lovich 8y ago
    Not everyone views government as a purely negative
- pc86 8y ago
  You're right, it couldn't possible be that some people actually have good intentions and want to do good work for a good salary utilizing their decades of expertise in incredibly complex and ever-changing topics.
  - jondubois 8y ago
    It's incredibly complex and ever-changing for a reason $$$.
    - tikkabhuna 8y ago
      Regulations are ever changing because regulators want the market to be a certain way and companies will look to innovate and sometimes this is in a way the regulator doesn't believe is in people's best interests. If you look at MiFID 2 that came into effect at the start of this year, it cost financial companies significant amounts to comply. Many of these companies would prefer it didn't exist. Others have identified opportunities from the changes that they can use (Dark pools being less prevalent and the rise of Systematic Internalisers). Its complex because there are lots of moving parts and regulators want to keep the market in check without having undesired consequences.
retube 8y ago
Yeah. we hire ex regulator employees cos we are trying to comply with regs, not beat them. regulations and regulatory feedback can be hard to understand, use arcane language, and may be apparently inconsistent. having people who can interpret and advise is very useful.
- justaguyhere 8y ago
  having people who can interpret and advise The solution here is not to hire those who wrote those regulations at massive salaries. The solution is to write the regulations that is easy to interpret by those for whom it was written in the first place! This is like me writing un-maintainable, insane code that only I and I alone can understand and nobody else, just so I can keep my job! This would be the fastest way for me to get fired. But somehow this is the norm in law and regulations?
  - hndamien 8y ago
    English is apparently a horrible language for writing law. Especially bad for reading it.
    - justaguyhere 8y ago
      I wonder if this is the case in other English speaking countries like England, Australia etc? This sounds like a flimsy excuse...
      - hndamien 8y ago
        I was half joking, like people talking about programming languages. Legal docs just aren't very user-friendly have pretty large attack surfaces due to language.
  - sct202 8y ago
    I think the challenge with regulation is that it is infrequently revised, so imagine you have to write code that is works and also cannot be edited for 10 years. It's a long time, so if you happen to over specify your regulations, you might end-up creating a giant loophole that will be open for years. If you under-specify it, you end up with a lot of uncertainty over what is or isn't included. Having been on the receiving end of a lot of safety and environmental regulations, I would have appreciated more specific guidelines, especially with the number of meetings I had to go to where we would internally try to justify if our decisions were going to violate something or not.
xg15 8y ago
> They do this because everyone sees value in people moving from government to private industry. Who is "everyone"? The risks this opens for biased decision making or straight-up corruption are well-known.
- pc86 8y ago
  Are you suggesting that we have college grads choose "government" or "private sector" and they're not allowed to switch after that?
  - mattnewton 8y ago
    He’s suggesting the risks of regulatory capture when the people you are regulating can offer you a cushy job after your term are great and unaddressed by gp’s naive model.
    - bobwaycott 8y ago
      I believe you meant naive.
      - mattnewton 8y ago
        Yup, fat fingered it, thanks.
fipple 8y ago
Harry Truman would have been waiting for the punchline. He had no money, but he thought he shouldn’t denigrate the office of President by writing books or cashing in with a corporate gig. Medicare was partly passed to get him health insurance! Yeah, it was a long time ago.
- TangoTrotFox 8y ago
  Engaging in actions after office that would suggest behavior while in office could have been 'for sale' is really quite a new concept. It only started with Gerald Ford [1] in 1977. Quite amusing. The banks engaged in extremely reckless behavior that caused immense suffering to millions and devastated the world economy, yet exactly 0 individuals faced any personal accountability. And then the president gets out of office and goes to give speeches on Wall St. at $400k a pop. Oh yes, and Eric Holder the former president's Attorney General who also chose not to give any consideration to prosecution, simply resigned and immediately returned to Convington & Burling -- a law firm who had as clients many of the banks responsible for the financial crisis. --- Quite fortunate for establishment politicians that Americans are so divided. Instead of focusing on events like this, we instead attack each other. In a two party system so long as you make people hate and fear the alternative enough, it doesn't matter what you do - since you can safely rely on people resigning themselves to 'Well.. it's better than the alternative.' It's almost like politicians might have even realized this and are utilizing division of people as a tool to ensure the perpetuation of the current political class... [1] - https://www.thoughtco.com/former-presidents-speaking-fees-3368127 https://www.thoughtco.com/former-presidents-speaking-fees-33...
  - j-c-hewitt 8y ago
    It's not a new concept historically speaking. It just runs counter to contemporary, generally Progressive (as in early 20th century Progressive vs. modern progressive) ideals of republican virtue. Offices being for sale and run for profit is the old way of doing things both in the US and around the world. America's laws are generally supposed to prevent it because it has been the natural tendency for government offices to be spoils.
gaius 8y ago
A one-way hop is probably fine. A revolving door is not.
qubax 8y ago
> So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? Sure you can. But you shouldn't be regulating the companies you hope to work for. If these people were angling to get cushy jobs for large banks, don't you think there is a conflict of interest there? And if you were large banks, wouldn't you tell these regulators you'd love to hire them for their "expertise" so that you get preferential treatment? If you think these people were hired for their "expertise", that's naive. It's rewarding regulators for working for the banks interests and it's a signal to future regulators that they also will be taken care of if they "do the right thing". Think about it. If you were going to regulate facebook, do you think it is smart to stack the regulatory board with people who want to work for facebook after the regulation is created? Don't you think that's a conflict of interest?
- tikkabhuna 8y ago
  If banks were leaning on current regulatory employees whilst they were still employeed, that sounds like bribery and should be already covered by existing laws. Remember that there are many banks and that all regulation covers them (although certain bits focus will hit them in different ways). Also, regulation goes out for review before it gets passed. If a certain bank was pushing for regulation to specifically benefit them, others would raise it. I know of people who worked at the European Securities regulator. Some were seconded from PwC/EY/etc because they get knowledge share. Regulators can learn from people in industry, those in industry learn about the "spirit of the law". With the recent MiFID 2 regulation in Europe, areas were left vague so that the regulators could expand the definition based on whether they thought it was needed. European financial regulators have moved towards principles[1], over rules, so that they are not constrained when a firm does something that breaches the spirit of the law, but not the letter of the law. [1] https://www.fca.org.uk/about/principles-good-regulation https://www.fca.org.uk/about/principles-good-regulation
x2398dh1 8y ago
So your argument is, "Self-interested entity A wants to gain something, therefore they should take it." There is absolutely zero substance to what you are saying. You are basically saying, "the strong survive! Yay on strong! Boo on weak!" That is the basis of what you are saying. Then you back it up by saying, "This is the way it has always been done! Timmy jumped off a bridge too, so I should do it!" Did you know that it is completely possible that other Governments are doing things wrong as well?
- chollida1 8y ago
  There are alot of quotes in your comment, none of them came from anything I said in my original comment. I love good discussion, I find nothing helps form and destroy opinions better. If you'd like to have one I'll participate.
  - jessaustin 8y ago
    Haha if you really loved discussion one would wonder why you chose this particular comment as the only one of a dozen mostly more substantive comments to which you would respond after three hours...
- oliwarner 8y ago
  Zero substance? The point is that these are experts in their niche of law. That is a highly sought after skill. What is your argument that these people should not be able to use their knowledge of the law? Are they automatically corrupt or something?
  - smolder 8y ago
    They are not automatically corrupt, but they are absolutely and automatically worthy of suspicion of corruption, as doing this revolving door thing is indistinguishable from corruption on the surface. Experts who aren't the authors are the only ones who can safely be assumed not to be corrupt and are therefore the only people who you can allow to be hired if you hope to prevent corruption.
paulddraper 8y ago
Exactly. This is very typical. No one bats an eye at a software author consulting on the software. The difference here is that laws are mandatory. But that doesn't change the equation of expertise.
- s73v3r_ 8y ago
  A software author consulting on software they wrote is a far, far different situation than someone regulating an industry then going to go work for that industry.
deleted 8y ago
[deleted]
mikeash 8y ago
It’s a major conflict of interest to go from writing the regulations to being paid by the companies you regulated. What if it becomes understood that you get a high salary for an easy job if and only if you write regulations that are favorable to the companies? How do you stop this without limiting fundamental human freedoms? I have no idea. But that doesn’t mean this situation is good or that we should stop pointing out the problems. The lack of a solution does not imply the absence of a problem.
- yellowstuff 8y ago
  Matt Levine looked into these competing theories and came up with more evidence for the view that harsh regulators get hired by banks more than lax regulators: https://www.bloomberg.com/view/articles/2014-06-26/strict-regulation-makes-the-revolving-door-spin-faster#footnote-2 https://www.bloomberg.com/view/articles/2014-06-26/strict-re...
  - jderick 8y ago
    Was he then hired by a bank? :)
    - graedus 8y ago
      Other way round - he's Goldman alum
  - PurpleBoxDragon 8y ago
    What's the possibility that harsh regulators are hired more to create a kind of regulatory capture. The harsher the regulation, the more you need the expert to know how to navigate it, and the less likely competition will be able to navigate the regulation.
  - abalone 8y ago
    Levine’s stuff is great but this one conflates strictness with complexity. You could have simple regulation which is harsh on banks.
  - 8y ago
oliwarner 8y ago
I'm with you but I think the automatic fear is people in power spend that time writing laws that only they understand how to exploit. The scope for meaningful oversight diminishes as the law gets more and more technical. Financial regulation is both extremely technical and tightly wound into money (obviously). I'm honestly not sure how corruption of office laws cover this stuff. It may not be easy to prove that a loophole existed for later exploitation. How would you punish it if (eg) a third party bought that knowledge in good faith and made billions off it?
- germinalphrase 8y ago
  In a world where a state governor can accept $175,000 in loans, gifts and other personal benefits from a businessman in exchange for arranging “meetings between [the businessman] and Virginia government officials, hosting and attending events designed to encourage Virginia university researchers to initiate said studies, directly contacting government officials in an effort to encourage said studies, promoteing [the businessman’s] company’s products and recommended that senior government officials meet with the [businessman] to discuss how the company’s products might lower healthcare costs of public employees” without being found guilty of corruption - well, I just don’t feel confident we have any ambition as a country to curtail corruption by our political/business community. I understand the legal arguement - but it just doesn’t seem right that that kind of behavior is above board. [0]https://www.forbes.com/sites/insider/2016/07/13/scotus-quid-pro-quo-analysis-in-mcdonnell-may-broadly-affect-bribery-insider-trading-prosecutions/ https://www.forbes.com/sites/insider/2016/07/13/scotus-quid-...
treis 8y ago
>So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned? The problem is the implicit, or perhaps even explicit, promise of lucrative jobs from regulated companies to those writing the regulations. There's an incentive for the regulators to go easy on these companies in order to get a job after they leave their government jobs.
y-c-o-m-b 8y ago
I get what you're saying, but this is a dangerously optimistic view. Does "conflict of interest" mean nothing then? What kind of checks and balances do we have to prevent corruption? A quick google search for those jailed for the financial crisis reveals a tremendous amount of corruption and this looks to be the tip of the iceberg: https://www.channel4.com/news/factcheck/factcheck-how-many-bankers-were-jailed-for-their-part-in-the-financial-crisis https://www.channel4.com/news/factcheck/factcheck-how-many-b...
sp527 8y ago
Let's run through a simple iteration of logic 101: if someone knows they can be paid a boatload of money later on by companies they regulate, they will not regulate them in a way that will jeopardize that exit opportunity.
pesmhey 8y ago
Many who crafted laws after 1774 revolution work in government afterwards. Disgusting!

geggam 8y ago

And this surprises who ?

pizzazzaro 8y ago
Apparently the Libertarians that think such a revolving door is a "good thing for people's careers", but forget about why those regulations exist in the first place.

mr_tristan 8y ago

We have a system that lets legislators manufacture a job specialty for themselves. Out of basically nothing but reactions to serious problems of the past. While it may generally be done in good faith, it still doesn't seem to avoid a tragedy of the commons. We now are building a system so byzantine that nobody wants to operate without a part of their business working to understand public policy. Complexity seems to beget more complexity. While this sort of thing may have "always been done", I sometimes fear that with more tools like machine learning, AI, etc, we are going to just simply compound the rate of complexity growth. And thus we end up with specializations that were completely manufactured. It just seems wasteful.

nraynaud 8y ago
> Complexity seems to beget more complexity. it's funny, I see it a lot in software too, people who "write a script to manage/hide/tame complexity". Cool, a new layer to go through when something doesn't work well. On the general issue, it's pervasive at private companies too, where an important problem leads hiring ("this new person will be responsible that it doesn't happen again") and procedures centered around it whatever the cost. Then those companies round up and create a standard around it, and compliance jobs, etc.

kartan 8y ago

> The financial industry showed its might in other debates, as well. In one example, Republicans in the Senate joined with moderate Democrats in 2009 to defeat a plan to allow judges to set new terms of mortgages, a measure that could have also allowed Americans to get more favorable terms amid the housing crisis. This is a very important point. Wall Street is getting power and knowledge directly from the source. Who is defending Main Street needs? > But the effect of the banks’ influence, according to former lawmakers, was to dilute the legislation. This is one of the reasons we get so bad legislation. The original ideas and goals were good. But they get lobbied out of existence. So, I do not know if working for the Wall Street is a bad thing per se to do for legislators once they finish their terms. But the result is an unhealthy economy. And that needs to be addressed.

DanCarvajal 8y ago

Also the sky is blue.

gammateam 8y ago

and I aspire to do the same thing? any 4 year old can see this is an effective way of navigating life and securing access to goods and resources for generations, why do the rest of you guys spend decades acting like this is novel? this is how the whole world has functioned for millenia, you are WAY ahead of yourself if your motive for saying "AHA!" every time you see this is because its not the most ideal way to run an egalitarian society. The biggest newsflash should be that you were sold a false premise of how representation works in this country and the level of influence you get to have everyone that matters for the machinations of the world kind of already gets it?

krupan 8y ago

If this kind of thing bothers you, please help make Bitcoin successful.

DoctorOetker 8y ago

If the financial laws were designed to be machine readable, there would be no need to hire ex-regulators. The refusal to start formalizing law to a machine readable form indicates either incompetence or malice.

lolsal 8y ago
You don't think it's possible that 'financial laws' are just a little bit more complicated and complex such that there are more than two possible reasons they are not machine-readable? Lots of laws are up to interpretation which is why we have judges.
- DoctorOetker 8y ago
  Who cares if its complicated and complex? >Lots of laws are up to interpretation which is why we have judges. What you describe is retroactivity: i.e. in some systems (like Anglosaxon Common Law)- more than in others (like European Civil Law) there is some retroactive legislative power granted to judges, who normally only apply the law and not write or clarify it. This is orthogonal to formalization. I wish to illustrate this by example, but I want to keep my comment as orthogonal as possible to other opinions, since I am not trying to force civil law views on people who prefer common law and vice versa I will describe possible ways of formalizing the comment you made for 3 systems: civil law, common law and direct democracy. It's just an idea, fit or don't fit it in your own ideology as you like. General definitions: - Green zone: actions which are explicitly permitted with ultimately very low probability of retroactive punishment or fine for a perpetrator. - Red zone: actions which are explicitly forbidden with ultimately very low probability of retroactive non-enforcement of compensation to a victim of the action. - Grey zone: actions which are explicitly guaranteed to be retroactively decided upon by the appropriate authority: in the Common Law: either legislative branch or a judge; in a pure Civil Law: the legislative branch; in a direct democracy: a vote or referendum by the people at large, aka trial by democracy (frowned upon, just like stepping in the grey zone). - All cases are decided by a formal verifier, the victim (a company, the state, an individual, ...) presents the formal proof of the defendant's crime in the red zone. Normally the Defendant is unable to formally prove he is in the green zone (an inconsistency in the law). If he is able to present such a proof then the case is decided (and the law is either reformed to resolve this specific inconsistency or kept gray) by forwarding the case to the authority as described in the Grey zone definition. Virtually never should an inconsistency be found. - If an entity is found to have acted provably in the grey zone, anyone can make claims, and they are again brought to the appropriate legislative authority (parliament, judge or public depending on your system of choice) - A budget of say $1M per day for the US (which comes down to less than $2 per capita per year) goes continuously into a growing pot, and anyone is free to explore the machine readable law and construct hypothetical inconsistent situations. If you can find a hypothetical inconsistent situation before it actually occurs to people you spare people misery. The inconsistency that hopefully didn't occur yet is presented to the legislative authority, again parliament/judge/populace. At any rate, the rate at which inconsistencies are discovered tells us something about the quality of laws written, and which laws needs more attention than others. The reward is half the reward pot content, so if one a day is found its $1M, if 10 a day are found $100k if one every 10 days its $10M... This is what I meant with ultimately very low probability of retroactive decisions. - Risk averse entities will stay in the green zone, audacious ones embrace the whims of the legislative branch, which is hopefully more expensive to bribe (with money or jobs) than a regulatory agency: this may be true for a parliament but perhaps less true for a single judge. Bribing the populace as a whole seems uneconomical and ... transparent. - Since each sector has competition, and some actors will remain more in the green zone and other will sometimes risk the grey zone, whenever a gray zone event is tolerated, the green zone companies will complain because their competition got ahead with a gamble, and they will require less and/or smaller grey zones, while the company that was in the gray zone will demand bigger and more grey zones to scare away those that prefer the concept of finality. So basically each sector sees both forces that vote for finality and also forces that vote for retroactivity. Most will probably demand finality. Now grey zones can expand and contract, if 1) they keep expanding indefinitely at some point there is no law and we are judged entirely ad hoc by parliament/judges/populace, or 2) they settle on a specific extent and staying in the green or going in the grey is a personal choice or 3) society (industry and or population) starts demanding laws without or at least with smaller and smaller grey zones, and the process is encouraging formalization of all law. So retroactivity can be formalized without neccessarily devolving in ad hoc decision making. It's the same confusion as between determinism and formalization: an indeterministic finite state machine can still be formalized. So yes I still think its incompetence or malice. (today you can't even prove that you are in a green or red zone, in the system I just described you can at least verify such proofs if you can generate them)

smsm42 8y ago

How else could it be? To craft regulations in the field X, you need experience in the field X. That means, you must have worked in the field X, and probably doing something worth mentioning, otherwise what kind of experience would it be? Then, after you are done crafting regulations, what else you would be doing? I mean, you could just drop everything you know and start a new career, but it'd be weird to expect that happen in a majority of cases. I am actually surprised that's only 30/40 percent (maybe some of the staff weren't actually domain specialists but did something else). Most of the time, you could stay in the government for a while, but then you'd might move on to work in the field X again (might not, but everybody can't work work the government - I hope not). So the article sounds like "people with law degrees work as attorneys!" - yeah, thanks, Captain Obvious, you never disappoint. Now, I can see what people can be worried about - that the insiders of the industry would craft regulations in self-serving ways (also known as regulatory capture). The thing is, this is something that follows from the very nature of the thing - unless you want a highly technical field to be regulated by people who have no idea what's going on (not that it could happen in our politics, oh no sir, never!) you have to solicit help from the insiders and rely on their opinions. And then those insiders wouldn't just retire happily, having served their country, they'd continue being insiders with their own self-interest. We should stop being surprised about it.