Revelations of Ethics Lapses at Treasury Speak to Regulatory Capture
Because the Treasury Department needed another headache, a series of FOIA requests show that individual employees engaged in a series of unethical activities:
Treasury Department officials have been cited for soliciting prostitutes, breaking conflict-of-interest rules and accepting gifts from corporate executives, according to the findings of official government investigations.
The revelations of unethical behavior at Treasury are detailed in little-noticed documents posted this month on governmentattic.org, which publishes agency responses to Freedom of Information Act (FOIA) requests.
Some of these are stories about misuse of government resources, like an Office of the Comptroller of the Currency employee using his government-issued computer to solicit prostitutes on Craigslist (note to Treasury employees: bring your own laptop!). But while that’s a particularly splashy case that makes a good headline, we’re really talking about using your work computer for personal activity, not something that really gets my blood boiling; I’m sure I’ve bought something on Amazon on work time, and don’t feel very embarrassed about it. But other examples are far more egregious:
In another finding, the OIG cited an OCC staffer for accepting golf fees and meals from bank executives. The staffer, who had received ethics training, said he believed playing golf with industry officials under the purview of OCC was “a condoned activity.”
The golf outings took place on multiple occasions during workweeks when OCC was conducting bank examinations. Many of the greens fees and meals at the golf course were paid for by corporate executives […]
OIG found other financial conflicts of interest with the OCC relating to contract bids and the acceptance of improper gifts such as flowers, meals and at least one limousine ride. A separate Treasury official was deemed to have a financial conflict of interest in 2010 when the bank examiner disclosed he had an overdraft protection line of credit loan from a financial institution that was regulated by the OTS.
Treasury calls these all isolated incidents, but I actually think they point to something more concrete. The fact is that there is so much intermingling between the regulatory apparatus and the people in the industries they purport to regulate, that they cannot navigate all the conflicts of interest. They are basically in the same peer group as the people over which they have monitoring responsibilities. They hang out with them. They get friendly with them. After all, when they rotate out of government, these are the people they will ask for their next job.
Matt Yglesias writes:
We’ve had corrupt FBI agents in American history, but I don’t think we’ve ever had FBI agents who genuinely believe there’s nothing wrong with taking bribes from people who rob banks. There’s a firm consensus at the highest levels of American politics and society that we want the FBI to have an adversarial relationship with the people who rob banks, and then filters down through all levels of the agency.
Over the past couple of decades we haven’t had that kind of consensus about the financial services industry, and it shows in this kind of thing. A high-level of political culture that wanted banks to be poorly regulated creates a situation in which the question is about what the ethics handbook does and doesn’t permit regarding green fees. But once you’re in a situation of looking through the rulebook for a list of what kinds of favors you’re allowed to accept, you’ve already abandoned the idea of an adversarial rigorous relationship. And that’s not because line workers at OCC decided unilaterally to act that way.
That’s quite right. So this can be explained away, as it is by the Treasury Department’s own Inspector General Eric Thorson, as the work of a few bad apples. But it’s much larger than that. It’s larger than complying with the letter of the law. It’s the situation of individuals in a regulatory position thinking creatively about how to comply with that law in the first place.