Tuesday, 17 February 2009

"Not read" and the management of psychopaths

There is a story, probably just a rumour, that there used to be a man at the Bank of England who had a "not read" stamp. He would use it to stamp documents he wanted to be able to claim he had not seen before returning them to the sender.

The fact that this story is vaguely plausible is a big part of the problem with regulation. Epicurean Dealmaker suggests:
Staff the SEC, or whatever "Super Regulator" the government decides to deputize to oversee this mess, with a bunch of highly-paid, tough-as-nails, sonofabitch investment bankers. You will have to pay them millions, just like regular bankers. (You can tie their incentive pay to improvements in the value of securities held under TARP and TALF, if you like.) Pay them well, and investment bankers won't be able to treat them like second-class citizens at the negotiating table. Pay them like bankers, and your regulators won't hesitate to read Jamie Dimon or Lloyd Blankfein the riot act, because they won't give a shit about getting a job from them later.

Trust me, these are the kind of people you will need on your team: highly educated, financially sophisticated, psychotically hard-working, experienced professionals who know or can figure out CDOs, SIVs, balance sheet leverage, and credit default derivatives just as easily as the idiots who created and trade this shit. Leading your enforcement and supervision teams you need a bunch of smooth, smart, plausible, grandiosely self-confident senior bankers who will not hesitate to tell Vikram Pandit to go fuck himself, his mother, and the cow she rode in on if he ever tries to fuck with the United States government, the US taxpayer, or the pizza delivery boy again. You know: psychopaths.
Of course he is right in that such people, properly empowered and paid, would indeed regulate quite well. They would get it in a way that most public servants don't. The same argument applies to the tax authorities: if you staffed them with ex tax lawyers and investment bankers who got to keep 10% of everything they saved the taxpayer, you would collect an awful lot more tax and there would be many fewer tax avoidance schemes.

So it would work. But no government would ever have the courage to try it. You would have to fire a lot of the current senior regulators or tax collectors, and completely re-engineer the culture. Mr. "Not Read" wouldn't last ten minutes in a psychopath-enabled regulator. Which is both the reason it should be done and the reason it won't be.

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