It looks like it will be Rodge Cohen for Deputy Treasury secretary after all. The administration seems to have figured out that it's not going to find qualified people who don't have some substantial contact with the US financial system.
But why not, demand my interlocutors. Why can't we have regulators who aren't tainted with the blood of Main Street's investment portfolios? Matt Yglesias snarks:
And yet, look, we're only looking to fill a relatively small number of positions. Timothy Geithner needs a Deputy Secretary. And then there's a need for an Under Secretary of the Treasury for Domestic Finance, an Assistant Secretary for Financial Institutions, and an Assistant Secretary for Financial Markets. There are other positions in the department, but those are the four where you might think that experience with high finance specifically was vitally necessary. It's only three jobs. And you can't tell me that there aren't four people alive in the United States who have experience with finance but lack compromising relationship.
Well, that depends on what you want. If you want a really nice chap who's spent a lot of time studying one fairly small aspect of the financial system, academics abound. If, however, you define experience as having a broad sense of how all this stuff works, and an intimate knowledge of the broad US financial regulation system . . . well, where exactly do you get experience with the whole US financial system without, like, working in the US financial system, as either a banker or a regulator?
Financial expertise is not nearly as interchangeable as most people think. For the same reason that you do not want your dermatologist removing your gallbladder, someone like Nassim Taleb would not make a good regulator of the financial system. Nassim Taleb knows a lot about the markets he trades in. He does not, I would wager, know much about the theory behind US securities law.
In normal times, this doesn't matter as much as it does now. We're already months behind where we should be on a plan to fix the banking system, because the administration put its focus on passing a stimulus plan instead. We don't really have time for on-the-job training for the undersecretaries.
Moreover, even the people that I suspect most commentators think of as untainted often aren't. Professors can have nanny trouble or tax problems as easily as bankers--easier, maybe, because they get a lot more relative gain from chiseling on small amounts, and they don't have expensive lawyers to help them chisel legally.
Besides, if they have actual expertise that is relevant to the financial industry, you will often find that they have done work for said financial industry, because that pays much better than being a professor. Or they go into government, to Treasury or the SEC, and thereby become tainted by association with the whole gigantic revolving-door system.
So I suspect that the list of people who:
- Are US citizens
- Have never worked in any significant capacity for a failed bank or regulator
- Have made no substantial "errors" in their taxes or hiring practices
- Know enough about the global and especially the US financial system to hit the ground running
- Are prominent enough to come to the attention of Obama's vetting people
. . . is actually pretty short.
It's also worth noting that the notion of the everyman who brings a fresh, outsider's perspective to a bad system, sweeps the scoundrels out, and rebuilds everything fresh and new, is great in the movies. In real life, it's less effective. Systems are very complicated things, and the various feedback mechanisms are often not readily apparent to outsiders. Consider shock therapy in Russia. What Russia had in the way of an economic system in 1991 was really terrible. But getting a bunch of outside experts in to make sweeping changes created the environment in which the Russian oligarchs emerged, while the lives of ordinary Russians often got worse.
That's not to say that I'm happy with the notion that we'll get people who are tied to the system, because I actually agree that they are all too likely to protect bankers interests--not because they're corrupt, but because human beings are inherently sympathetic to the problems of those they know best. I just don't see what the alternative is. Appointing people with no ties to the financial system just means months of more delay while those people develop some.