I just listened to Treasury Secretary Paulson's news conference and came away with the idea that he remains confident in the ability of our economy to weather the current storm but remains concerned about the need to overhaul the current regulatory system. All of which put a smile on my face…a bitter one…some might even say a sardonic one.
For years I have warned that America's tripartite system of federal, state, and self-regulatory regulators was showing signs of age and falling apart. Alas, much like the cursed Cassandra, I was but another voice doomed to sound an alarm that no one would hear.
There had been clear signs of smoke, and then even clearer signs of fire - but nary a firetruck sped to the scene. Only after buildings started burning down did our regulators seem to take notice. It's not that the current class of regulatory executives are evil and incompetent; they are not. However, they are flawed (as are all human beings, including myself-just ask my wife). Too many of those regulating Wall Street are from the same old crowd that is regurgitated back and forth from the same old law firms and brokerage firms and regulatory agencies. It's not that these executives don't want to fix things. To the contrary, I know that they do. The ultimate problem is that they lack the skills and life experiences to equip them to do things differently than they do. We are all products of our environment and upbringing. None of us can escape where we came from. Unfortunately, Wall Street is now crippled by an inbred generation of regulators who cannot change the way they do things and perpetuate a failed system. We need new bloodlines.
Ultimately, I am reminded of a recent line I heard about Tim Russert. As the story was told, when he joined Senator Patrick Moynihan's staff he was troubled by the Ivy League pedigree of many of his colleagues. Russert, ever the blue-collar boy from Buffalo, felt out of place within such a coterie. Senator Moynihan purportedly pulled his new aide aside and comforted him with the following assurance: "What they know, you can learn. What you know, they can't."
For lack of a better line, that's about how I would explain the failure of Wall Street's regulators. They are educated. They come from the top schools and firms. By virtually all measures, they are the cream of the crop. Nonetheless, they keep missing the scandals and have consistently failed to redress the shortcomings. Sometimes you just can't learn Street smarts-you need to have gone to the school of hard knocks for such an education. Like I said, we need some fresh blood on Wall Street.