Accountability and the Regulator

On the first anniversary of Lehman’s failure, there has been an outpouring of media stories asking if the largest bankruptcy in American history was the best public policy decision. One article with a different critique caught my eye. It is linked below and titled, But Who is Watching Regulators? from the New York Times on September 13, 2009.

The article raises the issue of how regulatory agencies, now with more power than ever, can be evaluated, or even held accountable. The writer’s main concern is the following:

It’s tough, however to assign responsibility to regulators who routinely fend off or stymie anyone attempting to scrutinize how the cops on the beat functioned in the years preceding the financial meltdown.

Some Suggestions

Ironically this analysis suggests many of the same solutions that credit unions have been urging NCUA to approve:

• Vision to respond to the creative needs of their institutions
• Transparency, publicize the costs of rescue efforts
• Efficiency
• “Conscientious representation” where the regulators swear to put the interests of the community ahead of their own.

The article describes actions that NCUA, as a regulator, and credit unions could support to get back on the same page.

These suggested steps are in everyone’s interest. They would improve NCUA’s effectiveness and thereby the well being of the credit union system. So while regulators are often “self-regulating” in terms of accountability, these changes are ones that are consistent with NCUA’s self interest.

Click here to read the full article.

Second link.