The Paradox of Federal Agencies

In the last months many Americans may well wonder what's been going on at numerous Federal Agencies charged with oversight of key sectors. Whether that be the Minerals Management Service (M.M.S.) which inappropriately approved deep sea drilling using a non-standard 7" diameter pipe as opposed to the 10" norm, to the SEC, which somehow blew it during the Bernie Madoff Ponzi scheme.

As the news unfolded, we learned that key personnel at each Agency were whiling away the days gazing at Internet porn. It became something of a joke, albeit not to those stakeholders who've been punished severely on account of the lax regulation.

But the paradox of federal agencies is why some are so ineffectual, while others have risen to the challenge (such as the EPA, IRS) and certainly in relative terms.

In a recent New Yorker piece ('The Regulatory Crisis', June 14 & 21), it's acknowledged that both the SEC and M.M.S. were the pits. The author notes, for example, how the M.M.S. "allowed Massey Energy to flout safety rules", while the financial regulators "let A.I.G. write more than a half a trillion dollars of credit-default protection without making a noise". (See my previous blogs on credit default swaps from last year, especially).

Meanwhle, the SEC "failed to spot the frauds at Enron and WorldCom and gave Bernie Madoff a clean bill of health." (Well, we're aware in retrospect that one of the SEC regulators had been engaged to Madoff's niece. Maybe it played a part, maybe not. Or maybe it was too much obsession with porn by lower echelon personnel!)

Of course, the usual culprits are cited, especially the notorious "revolving door" between government and industry - which enables the classic set piece of (industry) "foxes" guarding or overseeing government "henhouses". This isn't limited to regulation by the way, it extends to the pernicious and cancerous lobbyist parasitism that uses lobby-owned or directed mavens (like Bill Tauzin, R- La. in 2003 with The Medicare "Modernization Act") to craft legislation friendly to industry. (That "doughnut hole" didn't occur by coincidence, nor did the inability of Medicare to bargain for the best drug prices, like the Veteran's Administration!). Once Tauzin departed the House, he found his way right back to PhrMA as a prime lobbyist)

As I've noted before, in other nations - like Barbados- once a person serves in government he must wait at least ten years to return to serve or run in any office, if he's been in an industry that government depends on (e.g. Oil, Utilities, etc). That is, he or she must wait 10 years after leaving the industrial post before entering government service. Harsh yes, but then Barbados has now preserved a genuine democracy for over 370 years, as opposed to enabling a corporatocracy to hatch and for corporations to trump the votes of citizens.

Anyway, the author addresses two sources of the problem, with which I agree:

- Regulation (at least since the Reagan era) has been de-legitimized and is "seen as little more than a tool of Washington busybodies"

- Congress tends to take a "famine or feast" attitude to agency funding, allocating more when times are good, and much less when not. It also funds according to the party in power, controlling congress. For the consistently "de-reg" repukes, that means a subsistence budget and nothing more.

The last is wildly divergent from what governments in Europe do. They regard the protection of citizens' interests as far too important to leave to the vagaries of political cycles and concomitant income inflows. They instead allocate an appropriate initial set rate which can go up as more regulatory crises appear (such as the recent one to do with credit default swaps).

Other astute nations (e.g. Singapore) that respect the commonweal and regard it as the primary support of a society (as opposed to the military-industrial complex) reward regulatory agencies with salaries competitive with those of industry. That these nations are amongst the least corrupt in the world, with the most efficient bureacracies, is therefore not surprising.

Meanwhile, we have under-funded agencies in this country, like the SEC and M.M.S. (which was originally the domain and creation of Reagan's Arch Christianoid Interior Secretary James Watt- who once opined that the forests, resources of the country are exploitable given that Man "has dominion over them"). With little funding there's no scope for actual regulatory oversight, and too little manpower to make a difference, not to mention political players looking askance at anyone interfering in their "games". No wonder the regulators in these low-funded and marginalized agencies are reduced to porn-watching. But hey, at least the dopamine secretions in response prevent them from going "postal".

Meanwhile, citizens can applaud that the IRS and EPA are garnering respect and their personnel can walk with heads held high. The IRS continues to press its case against the Swiss Bank UBS to obtain the names of thousands of U.S. taxpayers who've been hiding their millions there. No political toady in this country has demanded the IRS back down, which shows me their personnel have a measure of self-respect in what they do. They know they are pursuing a proper goal so they can't be compromised. The same now also goes for the EPA which has pressed forward on a number of fronts, including recently exposing the toxic stew of 80,000+ chemicals that flood our ecosytems- many of them cancer causing agents (first pointed out by Devra Davis in her must-read: "The Secret History of the War on Cancer") while also making aggressive provisions to combat global warming if congress fails to act.

One thing I'll wager for sure, you'll not find IRS or EPA personnel wasting time watching porn. Their agencies are properly funded (relatively) and that indicates they're empowered to operate in good faith rather than bad faith. To Existentialist Jean -Paul Sarte, bad faith was like a cancer devouring a person's being, continually lowering its value and esteem. A person was disabled by whatever external circumstances to meet the standards of his job, or forced in some other way to live inauthentically. (Note , however - even the most suppressed mouse in an agency can still be a whistle -blower!)

What we need is to shore up the weakened federal agencies across the board, and oust all the political appointees thwarting their main missions. Then, we need to allocate funding, including competitive salaries, like other advanced nations do.

If we fail to act, we can't be surprised when the next salmonella outbreak occurs with hundreds felled, or the latest financial scam collapses with billions lost via a "product" unheard of hitherto.