A Foreign Service for Wall Street

By SCOTT McCLESKEY
NYT

LAST week, Lehman Brothers’ bankruptcy examiner released a report showing that the investment firm went to great lengths to hide its shaky finances. In fact, it even managed to evade a team of investigators from the Securities and Exchange Commission and the Federal Reserve who were embedded at Lehman headquarters with the sole purpose of ferreting out accounting sleight-of-hand.

How could they miss it? It’s possible that someone convinced them to look the other way. But it’s more likely that they weren’t qualified to be there in the first place.

Indeed, as Congress debates financial reform, it is ignoring the obvious Achilles’ heel in any new regulatory scheme: the inability of regulatory agencies to enforce and put in place the new rules, thanks in large part to their failure to recruit, train and retain effective staff.

That’s why, alongside thorough reform, we need to overhaul the way regulatory agencies are staffed. Fortunately, there’s a well-established model: the Foreign Service.

(More here.)