Tuesday, September 23, 2008
There are many reasons behind the current meltdown of America’s capital markets. Here is one that I know of firsthand.
In May 2006, senior aides to Chris Cox, Chairman of the Securities and Exchange Commission (SEC), approached me to become the agency’s Executive Director. They were faced with mounting pressures to make major changes. The Government Accountability Office (GAO) had just published a harsh critique on management and information deficiencies within the agency.
Cox’s senior staff and I held an extensive meeting on May 16. During this meeting they outlined an aggressive reform agenda for bringing the SEC into the 21st Century, to make its operations more transparent, and to use its extensive databases to create more agile and proactive monitoring of capital markets.
I was impressed with their zeal for reform and their willingness to move aggressively and creatively. It reminded me of the House management reforms Cox had supported when I was the Chief Administrative Officer.
They asked me for a “think piece” on how this could all happen. My follow-up memorandum was a detailed blue print for making the SEC more accountable to Congress and the public, while using information technology to enhance the monitoring of companies and capital transactions.
To my amazement, the blue print was rejected out-of-hand. It was considered too bold and too aggressive. It was like the May 16 meeting had not occurred. Eventually, they choose an Executive Director who was very junior and who had been a “morale consultant” in human resources. This person had never designed or led strategic change or managed information systems. The reform initiative was dead on arrival.
I wrote Chairman Cox on June 28 attempting to reopen our dialogue on strategic change: “I would like to help you address the material weaknesses identified by the GAO, as well as improving fundamental agency operations. These projects may include, business continuity, IT security, modernizing and formalizing the agency’s operational procedures and policies, cost reductions, and assuring the success of the next generation of online systems used by the public.”
I never received an answer. Now Chairman Cox must answer these and other questions as to why he did not act when he had both the mandate and the opportunity.