5 ms·

While the "revolving door" between banks and regulators clearly presents some problems, consider the alternative. I personally hate the idea of career politici

While the "revolving door" between banks and regulators clearly presents some problems, consider the alternative. I personally hate the idea of career politicians who have no practical experience in the private sector trying to write laws. (We see examples of bad legislation all the time from people who are clueless about tech, for example). Finance and central banking are very complicated areas, and I'd prefer to see regulations written by those who have an intricate and practical understanding of how those industries/markets work. It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. And on the flip side, it makes sense that private firms would be interested in hiring former govt officials and regulators who best understand how compliance and regulation work from the inside. It's like wanting to have an ex-IRS guy do your taxes. Regulators and public officlas who spent years earning little pay and doing public service also want to monetize their experience and finally get a good paycheck after leaving office. (Lots of examples of this in the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at goldman sachs). In this article, it sounds like a foolish (and possibly illegal) decision by a 29 year old former Fed guy, and as soon as it was identified by Goldman, they self-reported the issue to make it public. What else are they supposed to do?

dreamweapon 12y ago
It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. I can see how what you're saying could make sense, from a utilitarian perspective. But unfortunately lifetimes of empirical evidence suggest that we just can't trust any of these industries (oil/gas/mining, banking, pharma, telecom, etc) to self-regulate (which in effect is what the "revolving-door" culture leads to). Not all of the people in these companies are bad (most are not). But enough of them are, and the temptation for malfeasance (both to maximize profit, or to simply save their asses when the inevitably run into hot water), along with the human tendency to rationalize away such malfeasance (if it serves a perceived higher end) are simply too great.
- philrapo 12y ago
  So are you then suggesting that it's preferable to have regulators who never had hands-on industry experience in their relevant sector?
  - dllthomas 12y ago
    Ideal might be a mix - some with industry experience and some explicitly without it. It's a toughy, though.
  - alexqgb 12y ago
    I don't know, is it preferable to have cops who are ex-Mafia on the grounds that they "just know more about crime"? "Regulation" is a polite word, so it's easy to lose track of what it really means. But what it really means is policing. Contrary to what the Republicans tell you, ours is not a planned economy in which government bureaucrats are making operational decisions. This isn't the Soviet Union, and they don't exist to govern the allocation of the shoe supply. Generally speaking, regulations is capitalist economies are about limiting the otherwise limitless appetite for profit by imposing extraordinarily high costs on harmful, reckless, and otherwise predatory behavior. If regulators want to retain outside consultants from an industry that's one thing - especially if the people they're hiring are whistleblowers who can be relied on to have no further employment with the people they busted. It's when industry starts hiring ex-regulators that things get really sticky.
    - philrapo 12y ago
      >"Regulation" is a polite word, so it's easy to lose track of what it really means. But what it really means is policing. The FCC polices the tv/radio/satellite/cable industry, but it also writes regulations that affect the business. It is preferable to have a head of FCC with industry knowledge. Having industry experience does not automatically make one corrupt or criminal, which seems to be your line of thinking. >Contrary to what the Republicans tell you, ours is not a planned economy in which government bureaucrats are making operational decisions. Ours is not a centrally planned economy, but regulators can still enact policies that positively or negatively affect how an industry functions.
ams6110 12y ago
Maybe we should just have less regulation? Nip the problem at the source.
- alexqgb 12y ago
  See "Beijing / air quality of" to understand why the little-to-no-regulation crowd finds so little traction with the general public.
dragonwriter 12y ago
> (We see examples of bad legislation all the time from people who are clueless about tech, for example). I'm not sure we have, except coincidentally. Most of the instances of "bad legislation" relating to tech that people point to aren't a result of either: (1) People who don't know about tech drafting laws, or (2) Laws that don't serve exactly the interest that their drafters and legislative sponsors intended them to serve. Its true that people selling this kind of legislation to the public often use inaccurate, misleading, and even nonsensical statements about technology to sell them, but that's very different than the fundamental problem (insofar as the laws are considered bad) being ignorance of technology among lawmakers.
- alexqgb 12y ago
  The worst tech-related legislation was SOPA/PIPA, and that had less to do with ignorance on the part of regulators and more to do with a full-court press by IP holders deliberately trying to break the internet to preserve their lock on content.
alexqgb 12y ago
"Regulators and public officlas who spent years earning little pay and doing public service also want to monetize their experience and finally get a good paycheck after leaving office." Do you really think any company is going to hire an honest, competent ex-regulator who has made a career of fining and frustrating their top executives - and possibly referring them to prosecutors? Or do you think they're more likely to hire that regulator's "friendlier" colleague who spent the same amount of time defusing and deflecting warranted regulatory actions in hopes that he'd be rewarded with a plum gig once he left the government? Assuming they did hire the softie, can you see how they'd want everyone still working for the government what cushy well-paid gig the guy ended up with? And isn't that exactly what happens? "Lots of examples of this in the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at goldman sachs)" Well, yes, my point exactly. "Lots of people doing it means it's okay" is one view. Others would call the same pattern "evidence of entrenched systemic corruption." Indeed, the very fact that this is so widespread that's so problematic as that's what signals to our shadier "regulator" in the previous example that he will, in fact, be suitably rewarded if he plays ball. "In this article, it sounds like a foolish (and possibly illegal) decision by a 29 year old former Fed guy," No, not "possibly illegal". Flagrantly illegal. That's why he's got a criminal defense lawyer.
- mariodiana 12y ago
  Let me share a little story that I find analogous. In New York City, the Mafia runs the illegal gambling. I don't know if it still goes on, but some years ago I know for a fact that the bookies used to stay friendly with the cops by cashing their paychecks for them. (You see, if you bring your paycheck to the bank, your wife will know how much you make.) One cop I was acquainted with became, when he retired, a small time bookie himself in a suburb of NYC. The small time bookies can't make it on their own, because you need someone to pass the big bets onto, when the action is a little too rich for your blood. Now, do you think the retired-cop-turned-bookie was a ballbuster to the mobsters in New York, or one of the "friendlier" cops? (I think I know what you think. My little story is really in support of your answer to the guy you're responding to. The way I see it, bankers and regulators aren't that much different from mobsters and cops.)
- philrapo 12y ago

dreamweapon 12y ago

It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. I can see how what you're saying could make sense, from a utilitarian perspective. But unfortunately lifetimes of empirical evidence suggest that we just can't trust any of these industries (oil/gas/mining, banking, pharma, telecom, etc) to self-regulate (which in effect is what the "revolving-door" culture leads to). Not all of the people in these companies are bad (most are not). But enough of them are, and the temptation for malfeasance (both to maximize profit, or to simply save their asses when the inevitably run into hot water), along with the human tendency to rationalize away such malfeasance (if it serves a perceived higher end) are simply too great.

philrapo 12y ago
So are you then suggesting that it's preferable to have regulators who never had hands-on industry experience in their relevant sector?
- dllthomas 12y ago
  Ideal might be a mix - some with industry experience and some explicitly without it. It's a toughy, though.
- alexqgb 12y ago
  I don't know, is it preferable to have cops who are ex-Mafia on the grounds that they "just know more about crime"? "Regulation" is a polite word, so it's easy to lose track of what it really means. But what it really means is policing. Contrary to what the Republicans tell you, ours is not a planned economy in which government bureaucrats are making operational decisions. This isn't the Soviet Union, and they don't exist to govern the allocation of the shoe supply. Generally speaking, regulations is capitalist economies are about limiting the otherwise limitless appetite for profit by imposing extraordinarily high costs on harmful, reckless, and otherwise predatory behavior. If regulators want to retain outside consultants from an industry that's one thing - especially if the people they're hiring are whistleblowers who can be relied on to have no further employment with the people they busted. It's when industry starts hiring ex-regulators that things get really sticky.
  - philrapo 12y ago
    >"Regulation" is a polite word, so it's easy to lose track of what it really means. But what it really means is policing. The FCC polices the tv/radio/satellite/cable industry, but it also writes regulations that affect the business. It is preferable to have a head of FCC with industry knowledge. Having industry experience does not automatically make one corrupt or criminal, which seems to be your line of thinking. >Contrary to what the Republicans tell you, ours is not a planned economy in which government bureaucrats are making operational decisions. Ours is not a centrally planned economy, but regulators can still enact policies that positively or negatively affect how an industry functions.

ams6110 12y ago

Maybe we should just have less regulation? Nip the problem at the source.

alexqgb 12y ago
See "Beijing / air quality of" to understand why the little-to-no-regulation crowd finds so little traction with the general public.

dragonwriter 12y ago

> (We see examples of bad legislation all the time from people who are clueless about tech, for example). I'm not sure we have, except coincidentally. Most of the instances of "bad legislation" relating to tech that people point to aren't a result of either: (1) People who don't know about tech drafting laws, or (2) Laws that don't serve exactly the interest that their drafters and legislative sponsors intended them to serve. Its true that people selling this kind of legislation to the public often use inaccurate, misleading, and even nonsensical statements about technology to sell them, but that's very different than the fundamental problem (insofar as the laws are considered bad) being ignorance of technology among lawmakers.

alexqgb 12y ago
The worst tech-related legislation was SOPA/PIPA, and that had less to do with ignorance on the part of regulators and more to do with a full-court press by IP holders deliberately trying to break the internet to preserve their lock on content.

alexqgb 12y ago

"Regulators and public officlas who spent years earning little pay and doing public service also want to monetize their experience and finally get a good paycheck after leaving office." Do you really think any company is going to hire an honest, competent ex-regulator who has made a career of fining and frustrating their top executives - and possibly referring them to prosecutors? Or do you think they're more likely to hire that regulator's "friendlier" colleague who spent the same amount of time defusing and deflecting warranted regulatory actions in hopes that he'd be rewarded with a plum gig once he left the government? Assuming they did hire the softie, can you see how they'd want everyone still working for the government what cushy well-paid gig the guy ended up with? And isn't that exactly what happens? "Lots of examples of this in the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at goldman sachs)" Well, yes, my point exactly. "Lots of people doing it means it's okay" is one view. Others would call the same pattern "evidence of entrenched systemic corruption." Indeed, the very fact that this is so widespread that's so problematic as that's what signals to our shadier "regulator" in the previous example that he will, in fact, be suitably rewarded if he plays ball. "In this article, it sounds like a foolish (and possibly illegal) decision by a 29 year old former Fed guy," No, not "possibly illegal". Flagrantly illegal. That's why he's got a criminal defense lawyer.

mariodiana 12y ago
Let me share a little story that I find analogous. In New York City, the Mafia runs the illegal gambling. I don't know if it still goes on, but some years ago I know for a fact that the bookies used to stay friendly with the cops by cashing their paychecks for them. (You see, if you bring your paycheck to the bank, your wife will know how much you make.) One cop I was acquainted with became, when he retired, a small time bookie himself in a suburb of NYC. The small time bookies can't make it on their own, because you need someone to pass the big bets onto, when the action is a little too rich for your blood. Now, do you think the retired-cop-turned-bookie was a ballbuster to the mobsters in New York, or one of the "friendlier" cops? (I think I know what you think. My little story is really in support of your answer to the guy you're responding to. The way I see it, bankers and regulators aren't that much different from mobsters and cops.)
philrapo 12y ago