Institutional Aspects of Regulatory Reform

Something we pay much too little attention to when we talk about policy in the United States is the nuts and bolts of making policy work. The French, for example, have a whole system of higher education oriented around the idea that going to bureaucrat school is incredibly prestigious and that has a lot of consequences for what it’s possible to expect the bureaucracy to do. Conversely in the United States if something goes wrong with regulation, we have a tendency to think first and foremost that we should have written some different rules down in the manual. But this may be the wrong place to look:

The single best thing we could do for financial reform: Triple the budgets of all financial regulatory agencies. Immediately. Regulators are woefully understaffed; this is fact.


In addition, I think there’s the airy question of the social status of professional regulators. In the post-1980 United States of America rich CEOs of profitable financial firms are very prestigious individuals. If one of them gets into an argument with a career civil servant, the civil servant loses. That’s not a law you can repeal, it’s a cultural fact you can work to change. But in the USA that exists today, the kinds of civil servants who are respected are the ones charged with public safety (military officers, CIA & FBI personnel, cops & firefighters) and schoolteachers. Presidents don’t worry about getting on the wrong side of professional bank regulators, and members of congress don’t thunder about the need to give professional bank regulators the tools they need to do their job.