The next Treasury secretary is no expert when it comes to financial regulation. Does that matter?
The Daily Beast
Jan. 11, 2013
No one doubts Lew’s expertise and experience when it comes to budget crunching and legislative dealmaking, the earliest criticism of him. But he doesn’t have the experience at the heights of industry and finance that’s considered typical of Treasury secretaries. Meanwhile, the job requirements have changed in recent years—the Treasury secretary is now one of the nation’s most important financial regulators. And Lew doesn’t have much regulatory experience...
The Dodd-Frank financial regulatory reform bill made the secretary of the Treasury’s role as the response coordinator for financial crises permanent with the creation of the Financial Stability Oversight Council (FSOC). The Treasury secretary chairs the council, and eight regulators serve as voting members.
The FSOC has the ability to recommend that an independent regulator, like the SEC, act on a certain issue, and if it refuses the FSOC can designate a group of financial institutions as “systemically important” and kick the issue to the Federal Reserve: “If FSOC’s unhappy with a regulator’s failure to act it can re-jigger jurisdiction through the Fed. That’s a pretty powerful tool,” explained Aaron Klein, a former Treasury official who is now the director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center in Washington, D.C. “The Treasury secretary has the responsibility to look over financial markets and the entire economic system to see if there’s going to be a failure that will trigger a cascading set of events that will bring down our and the world economy,” explained Greenberger...
By his own admission, Lew is no expert when it comes to financial regulation. Many observers interpreted Obama’s pick as a sign that the focus has shifted from cleaning up and reforming the financial system to dealing with long-term tax and spending policy, an area where Lew has nearly unmatched experience. “Now you have a huge fiscal challenge. Jack has expertise in how to balance the budget,” Aaron Klein said. “It’s a different time, a time for fiscal policy. That’s why Lew was chosen,” said Phillip Swagel, who served as assistant secretary for Economic Policy in the Bush administration. “This is not nuclear physics. Lew will learn and get to speed. I don’t think anyone is worried that the job is beyond him,” said Swagel.
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Financial Regulatory Reform Initiative