Academic

The Candidates and the Crisis--Skeel

By David Skeel and Bill Stuntz

I wasn't among those who were disturbed about the increasingly trivial bickering between Senators McCain and Obama until the tumultuous events in the financial services markets over the past several days. I'm now greatly disturbed, because I fear that a great opportunity for better government may be lost.

When Franklin D. Roosevelt campaigned for the presidency in 1932, he promised to do whatever it took to counteract the financial effects of the Depression. When he came to Washington, many of the best minds of the generation came with him or advised him. (Hard as it may be to imagine now, this included numerous law professors, people like Felix Frankfurter, James Landis, William Douglas, and others). They experimented with many different forms of regulation, at times contradicting themselves, but emerged with the securities and banking framework that governed the markets for the next seventy years, as well as our social security system.

In my view, we are in an increasingly similar position now.

It's clear that we need, among other things, a new regulatory framework to handle the dramatic recent changes in financial services, where lending is now done as much by hedge funds and through derivatives transactions as with traditional bank loans. But no one has a silver bullet for just what the regulation should look like. The best hope, in my view, lies not so much in any particular proposal, as in a general climate in which many of our brightest young minds feel a call to go to Washington, to work in our regulatory agencies and other government positions in the hope of helping in some small way as we try to come up with solutions.

This is not the ethos that prevails now, at least judging from the law students I see at my school and other schools. The government is just about the last place most of my best students think about going, not the first. There are many reasons for this, but one of them, in my view, is the absence of an ethos of government service.

Of the two candidates, McCain seems less likely to me to be the source of a call for change in this respect. Although he deeply believes that we should put our country before our individual interests, McCain's emphasis has always been on attacking entrenched interests in government, rather than building up a higher quality of government servant. But even if he were inclined to issue a call to serve in Washington, the politics of the moment make this very difficult. Obama would immediately link this to the Bush administration, and insist that a McCain presidency would mean four more years of ideological governmental hiring.

A call to government service is a much closer fit with Obama's political inclinations, but I worry that the politics of the moment will prevent him too from issuing such a call. The danger for Obama is that a call to Washington would be attacked by McCain as simply further evidence of Obama's elitism. McCain would frame the call as putting eggheads in charge of Washington so that they can make the rules for ordinary, hardworking Americans.

During the New Deal (and during the generation before, with the Progressive movement in the early 1900s), the emphasis on regulatory expertise, and bringing the brightest experts to Washington) did too often smack of elitism. The experts' view of ordinary Americans was patronizing at times, sometimes astonishingly and unselfconsciously so. But overall, the business and financial regulation they achieved was, in my view at least, a remarkably successful achievement. Creating a new ethos of government service now wouldn't guarantee success, but I think it would make success much more likely.

At the moment, at least, it's hard to imagine such an ethos emerging. I hope I'm wrong. McCain and Obama agreed to a ceasefire on September 11, in order to honor those who died in the tragedy. Perhaps they could agree to a similar ceasefire on the issue of Washington service, agreeing to disagree about the best solutions to our ever-deepening financial crisis, while speaking with one voice about the need for our brightest young people to consider spending time in the nation's capital.

Full post as published by Less than the Least on September 17, 2008 (boomark / email).