The hard work falls to the regulators
Robert Temple doesn't look obscenely rich. He's got big glasses and a thick walrus mustache. He does not wear bling. And the fact of the matter is that Robert Temple is not obscenely rich. But he could have been.
Temple is a professional regulator -- to be specific, the director of the Office of Medical Policy at the Food and Drug Administration. He's been called "an FDA icon." Dan Carpenter, author of the FDA history "Reputation and Power," says Temple "designed most of the modern clinical trial regulations. He could have stamped his own currency if he had gone into the industry." But he didn't. And figuring out why he chose the path of adequate compensation rather than one of personal helicopters is perhaps the most important question facing health-care reform and financial regulation.
Both landmark legislative achievements of President Obama's first two years in office left many of the most important details to regulators rather than inscribing them in law. The Wall Street bill, for instance, has more than 30 studies in it and does not prescribe things like the level of capital a bank has to hold or the precise way the Volcker rule is implemented or what is to be done about the ratings agencies. It leaves those decisions to regulators. Both bills require the creation of institutions, such as the Consumer Financial Protection Bureau and the state health insurance exchanges. And both require existing agencies, like the Federal Reserve and the Centers for Medicare and Medicaid Services, to take on much larger roles.
All of this tends to play poorly politically, with naysayers worrying about unelected bureaucrats making important decisions behind closed doors. But in some ways, the greater danger is that the doors will be open and the wrong people will walk through. As Eric Patashnik argues in his book "Reforms at Risk," recent efforts to open the regulatory process have mainly helped lobbyists and special interests. The people who show up and know what to do during the third phase of public comment for a regulatory act that most voters will never know happened are those who are paid to show up and trained to know what to do.
Thus the implementation period brings a dangerous asymmetry: The public quiets down, as people think action has been taken, but the lobbyists mount up. As Binyamin Appelbaum reported in the New York Times, some industry groups focused their energies on this phase even before the bills had passed. "When the Consumer Bankers Association convened its annual meeting in early June," he wrote, "there was still plenty of time to lobby Congress. But Richard Hunt, the group's president, told his board that the group should shift its focus to the rule-making process. The board voted to increase the group's budget and staff."
The danger doesn't end when the rules are set: Once the regulatory structure is constructed, it's in constant competition with the industries it regulates, and with much fewer resources. The problem reaches almost comical proportions with the financial and health-care sectors, who can offer a Scrooge McDuck-style swimming pool of gold coins as a signing bonus. And that's exactly what they tend to do, identifying smart, tough regulators and hiring them away by promising fantastic wealth.
It pays off: Forbes reports than an internal probe at the Securities and Exchange Commission found evidence that "a private-equity firm was able to avoid fraud charges only after enlisting the help of William McLucas, a former SEC director who'd joined white-shoe law firm WilmerHale."
The question facing lawmakers, then, is how do you make sure reforms survive the implementation, and then withstand the relentless and inevitable efforts at erosion? To put it another way: How do you get something like the FDA in the '50s and '60s, when one of its employees was featured on a list of the 10 most admired women in America, rather than the Minerals Management Agency in the aughts?
"A new agency or an agency that's rapidly expanding gives you this really unusual opportunity to entrench your vision years into the future," says Steve Teles, a political science professor at Johns Hopkins University. To paraphrase Spider-Man (who cadged this one from Abe Lincoln), with great opportunity comes great responsibility not to muck everything up. Passing these bills was only the first step.
Going forward, experts say salary is important, but on that score you'll never be able to beat the industries you're regulating. Instead, status and mission have to suffice. Working at the FBI, or even enlisting in the Marines, won't make you rich. But it will make you proud. The same has been true for agencies like the Federal Reserve. "Washington is a big status town," Carpenter says. "It's not just your name, but who you're with."
Another key is to secure the right staff at the outset, which requires getting the right leadership: You want someone that talented people will want to work with, much in the way top students will attend a certain university to work with a specific professor. But there's a tension between choosing someone who will secure the agency's reputation among experts and choosing someone who will secure the agency's reputation among the public. It's easy to imagine top legal talent wanting to work with the hard-driving, renowned Harvard law professor and consumer advocate Elizabeth Warren if she were to lead the Consumer Financial Protection Bureau. It's also easy to imagine the administration wanting a well-liked former congressman who could charm his former colleagues and be a public face for the agency. Getting someone who can do both will be tricky.
When I reached Temple at his FDA office and asked him why he's remained at the agency since 1972, his answer was less abstract. "Because it's a hoot," he said. "I don't need more money. I'm okay. I've always enjoyed what I'm doing. It's intellectually fascinating. I feel good about what we're trying to do."
If you have all that, maybe you don't need a private helicopter.