Financial Reform – Take a Leaf from Ike’s Book

It’s getting pretty easy to understand why Republicans aren’t too fond of regulations and those who enforce them. Last week, the SEC’s Inspector General released a report that several senior staffers at the SEC were spending lots of time surfing porn on the Internet. Some of these people are making serious coin — several of them make six-figure incomes, which ain’t bad for government work.

And just when and where was all this porn-surfing going on? When: During 2008, as the financial markets were imploding. Right at the time when you would hope that the SEC would be hyper-vigilant. Where: The SEC staffers were surfing on their government-supplied computers in their offices in the gleaming (relatively) new headquarters of the SEC. I’ve been to the SEC’s offices a few times — they’re really nice and conveniently located right next to Union Station. Handy in case you need to make a quick getaway.

SEC staffers consuming porn while the markets crashed is a little like Nero fiddling while Rome burned. (Actually, it’s a lot like it, except that Nero didn’t actually fiddle during the conflagration.)

Seeing this story about the SEC and porn gave me the idea to do a quick search of headlines with the word “SEC” in them on the New York Times website. There were lots of unpleasant results:

During the porn period of 2008, the SEC did nothing, apparently, to check up on Lehman Brothers as it was spiraling out of control. Maybe the staffers were otherwise engaged?

Despite warnings, the SEC did nothing to check into Bernie Madoff’s Ponzi scheme. There were multiple warnings, stretching as far back as the Clinton administration and continuing through the Bush administration. But nothing happened to stop Bernie from fleecing everyone with a healthy bank account in the New York metro area.

And it’s not just the SEC that racks up unimpressive regulatory results. In one of the many stories I read about the porn scandal — I wonder if reading about porn scandals and Eliot Spitzer is my own, peculiar form of porn? — it turns out that the inspector generals of other federal agencies have found considerable amounts of porn-surfing going on in their domains.

And, pushing past porn (yeah, please, would you please?) look at the many criticisms of the Federal Reserve’s performance in the midst of the financial meltdown, including my personal favorite, the forced fire-sale of Bear Stearns.

All of the things referred to above fall under the heading of Current Events. If you look back over the long history of federal agencies, well, it’s filled with grotesque stories of inefficiency and corruption.

So, today, as the Senate begins the financial-reform debate with a procedural vote, it’s hard not to admit that the Republicans who oppose more regulation and more government activity have a point.

But . . .

Is it really a good idea to leave the markets in exactly the same place they were in 2008? To trust that people of good intent will behave themselves? To place our faith in the self-correcting nature of the market?

Well, if it’s a good idea now, ignoring the financial crisis we’ve just been through, how come it didn’t work out so well in 2008?

It’s not a good idea now (don’t you just love the way I answer my own softball questions?) because it didn’t work in 2008. Which means, bad as new regs are, they are a lot better than leaving an obviously flawed system in place without any attempt at refinement.

That’s also why, instead of stonewalling, it behooves the Republicans to join in the debate, to propose amendments to Democrat proposals and to propose some changes of their own. Engage in the process. Make the best of it from their standpoint.

Dwight Eisenhower’s initial orders to command an invasion were for the invasion of North Africa. Ike referred to it as “the blackest day in history.” He could have continued to fight his orders, argued with superiors, delayed, and manipulated the situation. Lest you think the rigid hierarchy of the military proscribes such behavior, think again. History is full of generals bucking their orders. George McClellan did it to Abraham Lincoln on a regular basis. Douglas MacArthur didn’t mind playing games with the truth in an attempt to get his own way. And Ike had the same problem with British commander Field Marshal Bernard Law Montgomery, who routinely ignored orders.

But that wasn’t Ike’s way. One he was given the order, he went through with it. He did the best he could with what he considered an awful situation. The invasion of North Africa was a success — a stumbling victory but a victory nonetheless. Ike and his team learned many valuable lessons from it. All because he engaged in the process instead of stonewalling it.

As they face financial reform, Republicans should take a leaf from Ike’s book. He was a Republican after all; it shouldn’t be too hard.

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