Many who crafted regulations after the 2008 crisis now work for Wall Street
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If you were regulated and you had to hire someone to help you understand what you are and aren't allowed to do by these regulations wouldn't the first person you look to hire be the person who actually wrote the rules?
> Seventeen of the 40 most senior staffers who served on the House Financial Services Committee in August 2008, as well as 15 of the 40 senior staff who served on the Senate Banking Committee at that time, later joined or took jobs representing a large financial institution.
So you train for many years and acquire knowledge of a particular area and then what? You can't actually make money from the skill you learned?
People get angry when tech companies try to limit people mobility, you really have to work hard to contort your view to see this as being any different.
Most governments actually spend alot of money on programs to get people from private industry to do a year stint with the government and then go back to private industry. They do this because everyone sees value in people moving from government to private industry.
If you are against this what measure would you consider to be fair that doesn't limit a person's mobility, wrt work, and helps get people who worked in government into private industry.
How is this at all relevant? He used to work for a business association, now he works for one of its members. Get back to us when the NHL causes the economy to collapse, and then gets bailed out so that it is guaranteed to do the same thing again...
Also, Leafs suck.
That's just the kind of story that people tell themselves and others while they're making a ton of money by screwing over society; that way not only can people get rich doing horrible things, but they can also look their victims straight in the eyes and smile while they're doing it. It's a win-win! (in the sense that one side gets to win twice).
Instead of criticizing the system, they find an excuse to propagate it.
I dont have a solution, government is a beast that can barely be controlled. Voting and politicians seem like they have power, but the employees are often entrenched and reinforced by the winners of the current system.
If you look at MiFID 2 that came into effect at the start of this year, it cost financial companies significant amounts to comply. Many of these companies would prefer it didn't exist. Others have identified opportunities from the changes that they can use (Dark pools being less prevalent and the rise of Systematic Internalisers).
Its complex because there are lots of moving parts and regulators want to keep the market in check without having undesired consequences.
regulations and regulatory feedback can be hard to understand, use arcane language, and may be apparently inconsistent. having people who can interpret and advise is very useful.
The solution here is not to hire those who wrote those regulations at massive salaries. The solution is to write the regulations that is easy to interpret by those for whom it was written in the first place!
This is like me writing un-maintainable, insane code that only I and I alone can understand and nobody else, just so I can keep my job! This would be the fastest way for me to get fired. But somehow this is the norm in law and regulations?
This sounds like a flimsy excuse...
It's a long time, so if you happen to over specify your regulations, you might end-up creating a giant loophole that will be open for years. If you under-specify it, you end up with a lot of uncertainty over what is or isn't included.
Having been on the receiving end of a lot of safety and environmental regulations, I would have appreciated more specific guidelines, especially with the number of meetings I had to go to where we would internally try to justify if our decisions were going to violate something or not.
If you want to willfully misinterpret the comment to which you're replying, sure. Think of it more like this.
You write shit code not because you want to, but because the other code it needs to run with is similarly shitty and perhaps you have laws requiring it be a certain level of shit. You write this shit code for 60% of the salary of your former classmates, with albeit marginally better benefits than you could buy for that extra 40% on the public market. This shit code is used almost exclusively by one sector of the economy.
The companies in that sector of the economy have two choices when hiring people:
1. Hire someone like you who is intimately familiar with all the technical and business debt of the shit code you spent the last two decades writing. Because it's so complicated, and because you've made comparatively little money during your career, and you have a pension now, you're not really interested in doing this for less than $250-300k a year.
2. Hire someone else who needs to learn all this on the job. But everyone else is hiring people like you so "market rate" for this gig is at least $200k for the guys with no experience relying on a connection or two to even get the interview.
It's easy to say "well just do $x" while ignoring that $x is not realistically possible.
I can't count the number of times in law school that someone would raise a point about something being written ridiculously and the professor would walk them through an alternate way of writing it, and by the end, you often saw that what appeared convoluted was actually a fairly elegant solution.
I definitely came to law school with a very libertarian perspective and left with a grudging respect that most laws are actually written fairly optimally. Whether they should exist is a different question, but given that they exist, it is generally unlikely that there is a simpler way to write the law.
The fact that something is complex doesn't mean it is needlessly complicated.
All that said, I think there should be some sort of "cooling off period" where people can't work in a certain private industry for a number of years after working on regulation for that industry.
For example, consider a simple rule that says a dividend from stock is ordinary income, and money from a sale of stock is capital gains income.
It could be simpler--just count everything as ordinary income instead of shoving some off into a separate "capital gains" category that is taxed lower--but that was Congress' call, not the regulator's call. Congress has chosen to make the distinction, and so the regulator has to live with it.
A long time ago, that simple rule or something like it was what was in the regulations. Then some well funded party got clever. They wanted to give their shareholders a dividend. Let's say that dividend came out per share to 1% of the value of the share.
Instead of just doing that, they had the bright idea of doing a fractional stock split that takes each 1 share to 1.0102051 shares, with the price per share dropping to .989898 times the old price. That would be immediately followed by a mandatory stock buyback of 1.01021% of the shares, which would (if I did the math right when picking the split and buyback numbers) raise the share price back to the original price, and leave each shareholder with the same number of shares they had before plus cash from the buyback equal to 1% of the original share price.
But now that money came from a sale of stock, not a dividend! It was now capital gains according the party's lawyers and accountants.
OK, this is easy for the regulators to fix. Just add to the rule that stock buybacks are ordinary income. But then you'll run into cases where a stock buyback is actually motivated by some legitimate (from a public policy point of view) reason instead of simply trying to get capital gains status.
By the time you close off all the tricks, while still giving capital gains status to buybacks that are not trying to game the system, what started out as a simple rule of one seemingly clear sentence will be a few pages delving into considerations of how wide the buyback is and whether it causes substantial changes in the way ownership is distributed among the shareholders in order to classify buybacks as legitimate or attempts at gaming the system.
Now repeat this for all the other simple regulation, and pretty soon your nice simple, clear tax regulations are thousands and thousands of pages.
BTW, this is why most flat tax proposals are silly. They tend to promise great tax simplification by going to a flat rate (which they do not actually propose--they almost always actually keep a progressive rate with two brackets), but the non-flat rate structure in the current US tax code has almost nothing to do with why it is not simple. The non-flat rate structure takes up something like a paragraph on the first or second page of the IRS regulations. Just going flat shortens that paragraph. Once you get past all that, it is just one or more trivial table look ups.
The complexity in the tax code comes from answering the questions "how much of my income is taxable?", "how much of the taxable income is capital gains?", "what tax credits can I claim?", and so on. None of that cares whether the rate structure is flat, highly progressive, or anything else.
Who is "everyone"? The risks this opens for biased decision making or straight-up corruption are well-known.
Yeah, it was a long time ago.
Oh yes, and Eric Holder the former president's Attorney General who also chose not to give any consideration to prosecution, simply resigned and immediately returned to Convington & Burling -- a law firm who had as clients many of the banks responsible for the financial crisis.
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Quite fortunate for establishment politicians that Americans are so divided. Instead of focusing on events like this, we instead attack each other. In a two party system so long as you make people hate and fear the alternative enough, it doesn't matter what you do - since you can safely rely on people resigning themselves to 'Well.. it's better than the alternative.' It's almost like politicians might have even realized this and are utilizing division of people as a tool to ensure the perpetuation of the current political class...
[1] - https://www.thoughtco.com/former-presidents-speaking-fees-33...
Sure you can. But you shouldn't be regulating the companies you hope to work for.
If these people were angling to get cushy jobs for large banks, don't you think there is a conflict of interest there? And if you were large banks, wouldn't you tell these regulators you'd love to hire them for their "expertise" so that you get preferential treatment?
If you think these people were hired for their "expertise", that's naive. It's rewarding regulators for working for the banks interests and it's a signal to future regulators that they also will be taken care of if they "do the right thing".
Think about it. If you were going to regulate facebook, do you think it is smart to stack the regulatory board with people who want to work for facebook after the regulation is created? Don't you think that's a conflict of interest?
Remember that there are many banks and that all regulation covers them (although certain bits focus will hit them in different ways). Also, regulation goes out for review before it gets passed. If a certain bank was pushing for regulation to specifically benefit them, others would raise it.
I know of people who worked at the European Securities regulator. Some were seconded from PwC/EY/etc because they get knowledge share. Regulators can learn from people in industry, those in industry learn about the "spirit of the law". With the recent MiFID 2 regulation in Europe, areas were left vague so that the regulators could expand the definition based on whether they thought it was needed.
European financial regulators have moved towards principles[1], over rules, so that they are not constrained when a firm does something that breaches the spirit of the law, but not the letter of the law.
There is absolutely zero substance to what you are saying. You are basically saying, "the strong survive! Yay on strong! Boo on weak!"
That is the basis of what you are saying. Then you back it up by saying, "This is the way it has always been done! Timmy jumped off a bridge too, so I should do it!" Did you know that it is completely possible that other Governments are doing things wrong as well?
I love good discussion, I find nothing helps form and destroy opinions better.
If you'd like to have one I'll participate.
Experts who aren't the authors are the only ones who can safely be assumed not to be corrupt and are therefore the only people who you can allow to be hired if you hope to prevent corruption.
If you're taking goods, services, favours, even future employment, as a politician (or for your friends, family), you're corrupt.
If you're hiring a politician after they've left office to buy their influence (they do know people) or their oratory skill, or —as I started this— what they know about the law, I think that's fair game.
If you try to clamp down on the latter, nobody with any existing influence or industry (or F&F with same) will want anything to do with that area of government. I would rather have slightly corrupt but competent politicians than pure-hearted idiots.
Just to remember, there are shades of grey. A senator may have financial interest in the biggest industry in their state, but pushing for laws that further that industry isn't necessarily corrupt.
The only way you sort this out is getting rid of the middle-man and holding referendums on everything. And even that is vulnerable to corrupt influence.
It's tricky stuff to detect and enforce but it seems to infringe considerable freedoms to lock it down too.
Corruption is a huge problem with huge costs to society, however hard they are to quantify. It's like a cancer that grows exponentially and kills institutions, and the fallout is messy and difficult. So while everything you said has some sense behind it, I don't believe the cost of eliminating those potential conflicts of interest (which I see as small) approaches the value of reduced corruption (which I see as large.)
No one bats an eye at a software author consulting on the software.
The difference here is that laws are mandatory. But that doesn't change the equation of expertise.
How do you stop this without limiting fundamental human freedoms? I have no idea. But that doesn’t mean this situation is good or that we should stop pointing out the problems. The lack of a solution does not imply the absence of a problem.
https://www.bloomberg.com/view/articles/2014-06-26/strict-re...
Business is a parimutuel system: something that harms your company can actually be beneficial if it utterly demolishes your competitors. Many regulations are of this form. They are expensive and difficult to comply with for big companies, but they are impossible to comply with for small companies, and thus keep competing startups out of the market entirely.
Usually, people make the opposite argurment. That laws won't be harsh enough. And the evidence proved that wrong.
The scope for meaningful oversight diminishes as the law gets more and more technical. Financial regulation is both extremely technical and tightly wound into money (obviously).
I'm honestly not sure how corruption of office laws cover this stuff. It may not be easy to prove that a loophole existed for later exploitation. How would you punish it if (eg) a third party bought that knowledge in good faith and made billions off it?
[0]https://www.forbes.com/sites/insider/2016/07/13/scotus-quid-...
The problem is the implicit, or perhaps even explicit, promise of lucrative jobs from regulated companies to those writing the regulations. There's an incentive for the regulators to go easy on these companies in order to get a job after they leave their government jobs.
A quick google search for those jailed for the financial crisis reveals a tremendous amount of corruption and this looks to be the tip of the iceberg: https://www.channel4.com/news/factcheck/factcheck-how-many-b...
While it may generally be done in good faith, it still doesn't seem to avoid a tragedy of the commons. We now are building a system so byzantine that nobody wants to operate without a part of their business working to understand public policy.
Complexity seems to beget more complexity. While this sort of thing may have "always been done", I sometimes fear that with more tools like machine learning, AI, etc, we are going to just simply compound the rate of complexity growth. And thus we end up with specializations that were completely manufactured. It just seems wasteful.
it's funny, I see it a lot in software too, people who "write a script to manage/hide/tame complexity". Cool, a new layer to go through when something doesn't work well.
On the general issue, it's pervasive at private companies too, where an important problem leads hiring ("this new person will be responsible that it doesn't happen again") and procedures centered around it whatever the cost. Then those companies round up and create a standard around it, and compliance jobs, etc.
Now, I can see what people can be worried about - that the insiders of the industry would craft regulations in self-serving ways (also known as regulatory capture). The thing is, this is something that follows from the very nature of the thing - unless you want a highly technical field to be regulated by people who have no idea what's going on (not that it could happen in our politics, oh no sir, never!) you have to solicit help from the insiders and rely on their opinions. And then those insiders wouldn't just retire happily, having served their country, they'd continue being insiders with their own self-interest. We should stop being surprised about it.
This is a very important point. Wall Street is getting power and knowledge directly from the source. Who is defending Main Street needs?
> But the effect of the banks’ influence, according to former lawmakers, was to dilute the legislation.
This is one of the reasons we get so bad legislation. The original ideas and goals were good. But they get lobbied out of existence.
So, I do not know if working for the Wall Street is a bad thing per se to do for legislators once they finish their terms. But the result is an unhealthy economy. And that needs to be addressed.
any 4 year old can see this is an effective way of navigating life and securing access to goods and resources for generations, why do the rest of you guys spend decades acting like this is novel?
this is how the whole world has functioned for millenia, you are WAY ahead of yourself if your motive for saying "AHA!" every time you see this is because its not the most ideal way to run an egalitarian society. The biggest newsflash should be that you were sold a false premise of how representation works in this country and the level of influence you get to have
everyone that matters for the machinations of the world kind of already gets it?
>Lots of laws are up to interpretation which is why we have judges.
What you describe is retroactivity: i.e. in some systems (like Anglosaxon Common Law)- more than in others (like European Civil Law) there is some retroactive legislative power granted to judges, who normally only apply the law and not write or clarify it.
This is orthogonal to formalization. I wish to illustrate this by example, but I want to keep my comment as orthogonal as possible to other opinions, since I am not trying to force civil law views on people who prefer common law and vice versa I will describe possible ways of formalizing the comment you made for 3 systems: civil law, common law and direct democracy. It's just an idea, fit or don't fit it in your own ideology as you like.
General definitions:
- Green zone: actions which are explicitly permitted with ultimately very low probability of retroactive punishment or fine for a perpetrator.
- Red zone: actions which are explicitly forbidden with ultimately very low probability of retroactive non-enforcement of compensation to a victim of the action.
- Grey zone: actions which are explicitly guaranteed to be retroactively decided upon by the appropriate authority: in the Common Law: either legislative branch or a judge; in a pure Civil Law: the legislative branch; in a direct democracy: a vote or referendum by the people at large, aka trial by democracy (frowned upon, just like stepping in the grey zone).
- All cases are decided by a formal verifier, the victim (a company, the state, an individual, ...) presents the formal proof of the defendant's crime in the red zone. Normally the Defendant is unable to formally prove he is in the green zone (an inconsistency in the law). If he is able to present such a proof then the case is decided (and the law is either reformed to resolve this specific inconsistency or kept gray) by forwarding the case to the authority as described in the Grey zone definition. Virtually never should an inconsistency be found.
- If an entity is found to have acted provably in the grey zone, anyone can make claims, and they are again brought to the appropriate legislative authority (parliament, judge or public depending on your system of choice)
- A budget of say $1M per day for the US (which comes down to less than $2 per capita per year) goes continuously into a growing pot, and anyone is free to explore the machine readable law and construct hypothetical inconsistent situations. If you can find a hypothetical inconsistent situation before it actually occurs to people you spare people misery. The inconsistency that hopefully didn't occur yet is presented to the legislative authority, again parliament/judge/populace. At any rate, the rate at which inconsistencies are discovered tells us something about the quality of laws written, and which laws needs more attention than others. The reward is half the reward pot content, so if one a day is found its $1M, if 10 a day are found $100k if one every 10 days its $10M... This is what I meant with ultimately very low probability of retroactive decisions.
- Risk averse entities will stay in the green zone, audacious ones embrace the whims of the legislative branch, which is hopefully more expensive to bribe (with money or jobs) than a regulatory agency: this may be true for a parliament but perhaps less true for a single judge. Bribing the populace as a whole seems uneconomical and ... transparent.
- Since each sector has competition, and some actors will remain more in the green zone and other will sometimes risk the grey zone, whenever a gray zone event is tolerated, the green zone companies will complain because their competition got ahead with a gamble, and they will require less and/or smaller grey zones, while the company that was in the gray zone will demand bigger and more grey zones to scare away those that prefer the concept of finality. So basically each sector sees both forces that vote for finality and also forces that vote for retroactivity. Most will probably demand finality. Now grey zones can expand and contract, if 1) they keep expanding indefinitely at some point there is no law and we are judged entirely ad hoc by parliament/judges/populace, or 2) they settle on a specific extent and staying in the green or going in the grey is a personal choice or 3) society (industry and or population) starts demanding laws without or at least with smaller and smaller grey zones, and the process is encouraging formalization of all law.
So retroactivity can be formalized without neccessarily devolving in ad hoc decision making.
It's the same confusion as between determinism and formalization: an indeterministic finite state machine can still be formalized.
So yes I still think its incompetence or malice. (today you can't even prove that you are in a green or red zone, in the system I just described you can at least verify such proofs if you can generate them)
Somehow people think that having very dump very fast agents (aka computers) makes it very much better than having slower but smarter ones. That's like trying to fix bad roads by putting more powerful engines on cars and removing steering wheels.