Reforming the financial services revolving door
by: Lisa Gilbert
Regulatory capture, revolving door, conflicts of interest — these are just a few of the phrases used to describe a systemic corruption of government caused by the movement of high-level officials back and forth between government regulatory positions and the private sector to work in the industry they formerly regulated. The American people believe that they cannot trust government in large part because of this endless cycle.
In fact, according to the April 2014 Gallup poll, only 40 percent of Americans trusted the government to do what was right a majority of the time. The opportunity for this kind of revolving-door corruption is particularly ripe in the banking industry, where large financial institutions are overseen by a range of regulators — from the Federal Reserve to the Securities and Exchange Commission to the Commodities Future Trading Commission — and where these federal agencies continue to recruit Wall Street veterans with obvious conflicts of interest, as well as send alumni back into the private sector to benefit from relationships with those who remain at the regulators. Former agency staff members are able to more easily influence new agency rule-makings, counter investigations of suspected misconduct at their financial institutions and win exemptions from federal law, and conversely, former industry staff members in positions of power in government may be lax on their old employers. Former Citigroup employees, for example, head the Treasury Department and Office of the U.S. Trade Representative.continue reading »