Who Regulates the Regulators?

With hearings going on right now by the House Government Oversight and Reform Committee to review the recent financial crisis, something is becoming very clear to me.

The regulators haven’t been regulating. And it seems like none of them – Alan Greenspan and his successors, the banks and financial institutions, etc. – didn’t see the financial collapse coming. Some financial people and regulators made comments before the implosion that things were going to go bad, but they did nothing to alert the right people or to take corrective action. A perfect example of the attitude could be found at Standard & Poors, as evidenced by an email from 2006 (yes, 2006) that stated “Let’s hope we are all wealthy and retired by the time this house of cards falters.” So, even in 2006, some knew that the country’s financial framework was shaky at best.

It seems that the regulators have been derelict in their own duties. Was it their own greed? Was it that they were just terrified what would happen if they blew the whistle? Was it incompetence? Laziness? Indifference? Fear?

The more the hearings continue, the more I realize that there isn’t anyone minding the store. Sure, we have regulators, but it appears that their role was nothing more than to be window dressing.

The first thing that comes to mind is that we may need some “grand, all-knowing, all seeing overseer” who is in charge of all these financial processes and will take care to make sure they all are doing their jobs. But wait, what happens if the “grand, all-knowing, all seeing overseer” doesn’t do their job? And why must we add more government and more bureaucracy just because some people aren’t doing the jobs they are supposed to be doing?

We need to first look at those government agencies that are in charge right now and assess the level of competence of the people at the top, and clean house and bring in new blood, starting with the Fed and the Treasury. While the SEC is not the apparent cause of the stock market’s recent collapse – the collapse being an after-effect of the financial crisis – it does seem that some trading methods and practices need to be reviewed and possibly eliminated or re-tooled. Tight controls need to be put in place for hedge funds, which operate as if this is the Wild West. And companies like Standard & Poors or Moody’s that evaluate and rate stocks need to be audited themselves and if evidence that they ignored signs of trouble in the housing market and/or with financial companies and they did not reflect it in their ratings, they should be charged with fraud and face stiff fines. And, since it appears that these places profited from the housing market as long as they continued to rate companies favorably I think there was definitely too many conflicts of interest that go unchecked in the financial markets.

I admit, I don’t know the answer to the problem. I suppose that a “grand, all-knowing, all seeing overseer” would help, but I would prefer that these agencies just do the job they are paid to do. Is that too much to ask? But where does it end? The buck must stop someplace. Whatever the government decides to do, the American people should ask for complete transparency in everything these people are doing, and even the smallest tidbit of information on what these people do should be made public. I am sure there are millions and millions of Americans who would be more than happy to help keep an eye on the country’s financial health and would be quick to blow the whistle if anything improper is discovered. Count me in!




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The REAL ID – Real Smart, or Government Gone to Far?

It was announced today that for Americans born after Dec. 1, 1964, they will have to get more secure driver's licenses in the next six years as part of post-9/11 security rules. Michael Chertoff, Homeland Security Secretary, says the REAL ID program will be inexpensive and reasonable. Civil liberties officials say this is going too far, and some states believe it will cost them plenty.

The REAL ID Act was designed to make it harder for terrorists, illegal immigrants and con artists to get government-issued identification. The American Civil Liberties Union (ACLU) objects to the REAL ID because it involves sharing of personal data among government agencies. The Department of Homeland Security believes to guarantee the safety of the ID, they have to verify it against secure government data. Others like the ACLU are of the opinion that this can only make the chance of security breaches more likely.

The ACLU has a written objection to the law, claiming the REAL ID is the "first-ever national identity card system," which "would irreparably damage the fabric of American life."

What would this REAL ID mean for you? If you’re born after Dec. 1, 1964, by 2014, you would have to present a REAL ID-compliant driver's license in order to board an airplane or enter a federal building. If you’re over 50, the REAL ID would not be required at that time. The over-50 exemption was put in place to give states more time to get everyone new licenses. This age group is also considered low risk for a person being a terrorist, illegal immigrant, etc. By 2017, even for those over 50, a REAL ID-compliant card will be a requirement to board a plane. Of course, there are a lot of other details involved, but you get the idea.

I have to admit, I am not very bothered by this proposal of a REAL ID. You would think I would be, after just having my credit card compromised, and also after having other personal information potentially compromised during a security breach in the handling of Ohio tax information in 2007. There is a chance that if your REAL ID data gets stolen or somehow forged, that you could be in an indescribable mess trying to recover from it. And sure, I remember watching a lot of old movies as a kid, being scared when people in Europe during WWII were constantly asked to “show me your papers” in order to gain access anywhere.

But I remain very concerned about security in this country. Frankly, I don’t think the REAL ID will deter all terrorists and malcontents, but I believe it can help in at least preventing them easy access. I also think that people are deluding themselves if they think, in this day of GPS, cell phones, Internet cookies and other tracking like credit card transactions, and all similar the tracking like supermarket purchases, that they have any privacy left. They don’t.

One big benefit to the REAL ID is evident in their slogan: “One driver, one license." In the case of the hijacker who flew into the Pentagon, he had four driver's licenses and ID cards from three states. The REAL ID should help plug that hole.

It is critical, however, that the Department of Homeland Security make the REAL ID system hacker proof and tamper proof. Failure to do so would make the card not only worthless, but would compromise the security of the people they are trying to protect. I would like to see more details from the DHS on this matter.

So right now, I haven’t heard anything about the REAL ID that would make me lose any sleep. In fact, I would probably lose more sleep if we allow the current ID system to continue on as is. The REAL ID seems like a real good idea. I’ll keep a real open mind, though, so comments are welcome.


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