Tim Carney of the Washington Examiner wrote recently about the revolving door at the Consumer Financial Protection Bureau and noted how multiple employees of the bureau have left it for private-sector jobs in industries regulated by the bureau. Carney writes, “Peter Carroll helped shape the mortgage regulations at the Consumer Financial Protection Bureau until this spring. Now, Carroll is senior vice president of capital markets at Wells Fargo Home Mortgages, the largest private mortgage lender in the country.”
The revolving door refers to the movement of people from positions in government where they make rules to positions in the private-sector, which is impacted by those rules. An individual may go back and forth between a regulatory agency and impacted industries multiple times in his or her career. The revolving door between government agencies and the private sector is ripe for cronyism as personal relationships can impact policy decisions. It is easy to imagine how favoritism can occur when a regulator’s friends and former colleagues work for the companies that he or she is regulating. The revolving door is related to another aspect of cronyism: regulatory capture. Here, an agency’s regulations benefit favored companies at the expense of their competitors or consumers.
To learn more about the terms “revolving door” and “regulatory capture” check out these resources:
The Center for Responsive Politics on the Revolving Door
Susan Dudley on Regulatory Capture
In August we noted that a new federal regulation would slow the revolving door between the SEC and the private sector. Well, the Office of Government Ethics is withdrawing the rule before it can take effect (a seemingly unusual event). The Project On Government Oversight reports:
A notice published in Monday’s edition of the Federal Register said that the Office of Government Ethics (OGE) was withdrawing the new rule at “the request of the SEC” so that the agency could have more time to “effectively educate affected employees before the exemption revocation takes effect.”
That being said, OGE is planning to republish the rule in January, for an effective delay of about 90 days.
The ethics office said it expects to republish the rule in January 2014, but it then would take another 90 days for the rule to go into effect, according to Monday’s announcement. As a result, SEC employees who would be affected by the rule change—including supervisory accountants, attorneys, economists, analysts, and administrative specialists—will have even more time to take advantage of the loophole.
Reuters reports that the SEC is barring mid-level managers from appearing before the agency within one year of leaving. This will slow the revolving door between the agency and the industry it oversees. From the article:
The change in the SEC’s ethics rules will be a welcome development for those who have accused the agency of having far too many SEC staffers leave and work for legal and accounting firms that represent companies that are regulated by the agency.
A former Energy Department official is working for a company that’s received Energy Department subsidies. From the Free Beacon:
A former top Energy Department official has taken a position on the board of a company that received millions in taxpayer money from the department through a stimulus program that has come under criticism from Congress and independent watchdogs.
San Francisco-based ECOtality announced in a July 9 filing with the Securities and Exchange Commission (SEC) that it has appointed Brandon Hurlbut, former chief of staff for recently departed Energy Secretary Steven Chu, to its board.
Patrick Gavin from Politico.org has recently written the following article on a new play that is coming to Washington D.C. about politics and the revolving door. The play is called “The Politician” and directed by John Feffer.
“I wanted to show the revolving door here in Washington, how people go from the media world into the political world and back again. I also wanted to show the very interesting similarities between the language and the activities between the people in the punditry world and the world of policymaking; it’s an almost symbiotic relationship between the two.”
Andre Francisco from POGO has recently written the following blog post concerning the latest case of revolving door. A former lobbyist for Lockheed Martin moved to politics as a staffer with the Senate Armed Services Committee, influencing big decisions on military contractors.
John Bonsell spent five years as a lobbyist for major military contractors including Lockheed Martin, Boeing and SAIC. His new position puts him in a powerful place in a committee that oversees the defense industry and has considerable power to decide where defense funds are directed.
Before Bonsell, former Lockheed executive and lobbyist Ann Sauer held this very same position. Sauer worked for Lockheed for more than 10 years and was paid well for her work.
The President is expected to nominate a former industry lobbyist, Tom Wheeler, for the role of FCC Chairman. If true, this could turn into a case of regulatory capture. It will also be representative of the revolving door between regulators and the regulated.
He has the rare support of both industry groups and a number of consumer advocates.
Wheeler has served as an informal adviser to Obama in recent years and has been a big fundraiser for his political campaigns. He went into the venture investing business after years at the helm of the National Cable Television Association and then the wireless industry group CTIA.
Ezra Klein at the Washington Post writes about the staffers of a prominent politician, and how his position of authority has lead to his staffers becoming lobbyists:
…the point of hiring Baucus’s former aides isn’t that they can seamlessly insert any language they want into the final legislation. It’s that they have a direct line to Baucus, and to the people around Baucus, and that gives them a huge advantage. The fact is that human beings are more likely to find arguments convincing when they’re coming from friends rather than strangers or enemies.
That’s the key to most of the lobbying in Washington. It’s not about leveraging bribes so much as it’s about leveraging relationships — and that makes it harder to stamp out.
William D. Cohan from Bloomberg.com has recently written an article highlighting the latest case of the revolving door affecting the federal government. Mary Schapiro, former chairman of the Securities and Exchange Commission SEC, will be joining the Promontory Financial Group LLC as a managing director in its Washington office, in charge of its governance and markets practice.
[…] four months after leaving the SEC, Schapiro is joining a firm stuffed to the gills with former government financial-services regulators peddling their knowledge of Washington’s regulatory thicket to the banks and financial-services companies they once oversaw. (Schapiro, remember, also had a swell incoming trip through the revolving door: She previously ran the Financial Industry Regulatory Authority, Wall Street’s self-appointed watchdog, which paid her a bonus of almost $9 million after she left to go to the SEC in 2009.)
About 100 of the 400 Promontory employees are former Washington regulators; some 5 percent, like Ludwig, come from the Office of the Comptroller of the Currency, which regulates all banks with federal bank charters, including Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. Last year, the firm hired Julie Williams, the former chief counsel of the OCC. To keep things in the family, the agency hired as Williams’s replacement Amy Friend, a Promontory managing director.