Virginia Tech National Capital Region recently hosted a symposium titled "A Public Administration Moment: Forging an Agenda for Financial Regulatory Reform" to address such relevant topics as: How can financial regulation be made more transparent? What is the government's role in regulating financial innovation and risk? What are the educational challenges in preparing public administrators for financial regulation? And what are the lessons from rapid responses to tough economic issues?
Held at the National Academy of Public Administration (NAPA) headquarters in Washington, D.C., the symposium was organized by Virginia Tech’s Center for Public Administration and Policy (CPAP) in the National Capital Region, NAPA, and the journal, Public Administration Review. It was sponsored by the Smith-Richardson Foundation and supported by Virginia Tech National Capital Region Operations and School of Public and International Affairs (SPIA).
Anne Khademian, associate chair for CPAP and facilitator for the symposium, said that Virginia Tech organized the event to focus on the significant administrative challenges posed by the financial crisis from efforts to manage and oversee the allocation of hundreds of billions of dollars to the financial industry through TARP (Troubled Assets Relief Program) to the design, method, and leadership challenges associated with financial regulatory reform.
“The forum was an opportunity to bring together leading scholars and practitioners in public administration to identify lessons learned in assessments of the crisis and to focus on the administrative, educational, and leadership challenges ahead,” Khademian said.
The half-day symposium featured two panels of distinguished scholars from leading American universities, NAPA Fellows, the National Association of Schools of Public Affairs and Administration, and leaders in administrative reform. The first panel addressed “Lessons from the Financial Crisis;” a second, response panel discussed “Where Do We Go From Here?”
Transparency was a recurring theme throughout the day. “We’ve spent $350 billion and no one knows what we have done with it,” said Donald Kettl, University of Pennsylvania and NAPA Fellow. “We are in a long, dark, complex tunnel, and when we get on the other side it is not going to look anything like how we went in. So far we’ve talked with a presumption not very different from how we approached Iraq --we’ll get in, quickly do the job, and then get out. But how do we unwind from all the positions we’re taking? We need an exit strategy.
“The government seems to be inventing new tools on the fly, with nothing to track accountability. What does it mean for a government to own a bank? I don’t know the answer, and it’s not clear anyone does. We surely do have to keep track of the process. The further we are from the existing rules of government, the more important it is to work on transparency,” said Kettl.
Kevin Corder, Western Michigan University, added, “There is a substantial political challenge in the current Washington/Wall Street conflict. Someone has to stand up to Wall Street.”
"Capitalism’s endurance lies in the ability of federal government to reinvent its role in its dynamic relationship with the market," said Giselle Datz, Virginia Tech, National Capital Region.
Historically, U.S. Congress has not been very good at dealing with improbabilities; it will always go for the here and now, said Tom Stanton, Johns Hopkins University and NAPA Fellow. “There is tension between innovation and risk management. Risk will migrate to the place where government is least prepared to deal with it.”
Referring to the mortgage debacle, Stanton said that consumer protection was abysmal and people were encouraged to take subprime and other loans they couldn't afford. “We must help people to understand what they are buying,” he said.
“Risk needs to be controlled,” said Paul Peretz, California State University, Fullerton, “We can’t let people be as risky as they want to, even people who can afford to be.”
Marvin Phaup, George Washington University, cautioned that regulation cannot eliminate economic risk. Attempting to do so would restrict opportunity and make people worse off. Regulation can affect who bears risk. Shifting the incidence of risk more toward those willing and able to bear it is a useful and feasible goal for regulatory reform. “We should not regulate for regulation’s sake. Government can help financial markets work better by promoting competitive, informed pricing of risk. Translating complex risk into a price also increases its transparency,” said Phaup.
Several panel members pointed out that the gravity of the current financial crisis has resulted in enormous energy and response from American citizens about what they want. “People want to hear the truth; they can take it,” said Myra Shiplett, Randolph Morgan Consulting LLC.
“One of the important issues facing us is legitimacy: people don't understand why the government is bailing out insolvent banks but not insolvent homeowners,” said Stanton. “We need to listen better to people’s concerns.”
The symposium also offered a discussion on the role of public administration education in the financial regulatory reform. Laurel McFarland, National Association of Schools of Public Affairs and Administration, asserted that public administration should identify and address important issues and really pay attention to leadership at the state and local levels.
“We seem to have abandoned leadership development,” she said. “We need to understand that it is no longer possible to have only vertical organizations. We need to establish horizontal mechanisms so that all who have a piece of the pie can come together. Public administrators need to work in teams with MBAs and financial experts.”
To accomplish this, she said, colleges and universities need to transform curriculum to train students in a way that promotes independence in process and regulation. “We can’t accept public administrators who are drones and unthinking pencil pushers. They need to think in dynamic design about how to shape regulatory reform to public interest,” she said.
One of the greatest challenges, according to McFarland, is to convince capable young people that financial market regulation is something positive. A negative stigma rests on terms often used to describe and categorize public administration. “Generally the words ‘regulator’ and ‘administration’ don’t play well with the 20-somethings,” she said. “But this generation is interested in making a difference. If you create the right culture and ethos that will appeal to them, the outcome could be compelling and could bring real change to the system.”
Ron Boster, NAPA Fellow; Mark Cassell, Kent State University; Susan Hoffman, Western Michigan University; Mark Rom, Georgetown University; and Jean Schroedel, Claremont Graduate University, also served on the panels.
Papers presented at the forum will be published in a future issue of Public Administration Review.