Former banking Regulator William Black goes on the attack against today’s regulators pretty hard in an interview with Newsweek. He calls them all failures, while heaping the hardest scorn on Tim Geithner, who he labels “a disaster.”
Do you think the team Obama has put in place can overhaul the regulatory agencies?
The administration’s officials have all been failures as regulators. [Chairman of the Securities Exchange Commission] Mary Shapiro’s big thing was self-regulation. That worked real well: the self-regulation of the investment banks. Ben Bernanke [Chairman of the Federal Reserve] I’m also very critical of, but I do give him credit for being willing to drop a lot of his anti-regulatory ideology in the face of the crisis. He literally wrote the book on the Great Depression, but he was not going to go down in history as the person who caused the second Great Depression. Some of the things Bernanke did were very bad, but he is in sharp contrast to Geithner who has been wrong about everything in his career. When Geithner was once answering a question in response to Ron Paul, he said, ‘I’ve never been a regulator.’ He was then the President of the New York Federal Reserve, and he purports that he was never a regulator? That is a demonstration of what is wrong with the Federal Reserve banks if the head of the unit doesn’t think he’s a regulator. He’s a disaster.
What about the criticism that regulators are not paid enough, or well enough to attract talent and keep it?
The pay can be very bad, but it’s not simply that the pay is low. The agency regulating the Savings & Loans was not permitted to pay as much as the U.S. Office of Personnel Management pays. So, in terms of the initial selection, the better people will go to the other agencies. At the SEC, leading up to WorldCom and Enron, the turnover also became obscene. The average lawyer at the SEC stayed barely over two years, and your first year, you’re kind of useless. The far biggest thing is leadership. As long as the leader is some kind-of clown, the agency will fail.