raghu wrote:
(quoting Al)
Regulators confronting real-time uncertainty have rarely, if ever,
been able to achieve the level of future clarity required to act
pre-emptively.
For a couple of years (1983-85) I was a bank regulator, at the Philly
Fed, working on inner-city housing and small business lending, enforcing
the Community Reinvestment Act. But I also talked lots to colleagues who
were unearthing international portfolio damage as the Third World debt
crisis hit.
I found the biggest problem wasn't failure to crystal ball gaze. It was
regulatory capture by the industry. All my colleagues were interested
only in that revolving door to some bank manager job. The standard bank
management trainee program took ages and entailed all manner of boring
tasks. To go into the Fed as a bank examiner meant, in my recollection
of talks with colleagues, that within two or three years you'd have the
ability to scan a wide range of commercial bank functions and be on
familiar terms with the top compliance officials, lawyers and even
directors of your district's banks. And besides, you knew how to game
the regulatory system. So with that background, an examiner was often a
really attractive poach for a bank filling a top job. And so the
examiners intrinsically learned to go easy on their future employers.
And if bankers are politically conservative, phew, the ideology of the
central banker was utterly reactionary. That was 25 years ago, but I
doubt it's changed.
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