A trio of regulatory experts -- former New York Governor and Attorney General Eliot Spitzer, Savings and Loan star William Black, and San Diego Law Professor Frank Partnoy -- wrote an important op-ed yesterday that shouldn't get overlooked in the midst of health-care excitement. The gist is that because the U.S. government essentially owns AIG, thanks to the decision lat year to take huge equity stakes in the firm to prevent its failure, three directors on the AIG board are charged with representing the public interest. They have the wherewithal -- and the obligation -- to reveal the internal deliberations behind the government rescue and AIG's otherwise inevitable failure.
There are many questions yet unanswered about the interactions between federal regulators -- including a number of current officials, like Treasury Secretary Tim Geithner and Fed Chair Ben Bernanke -- and AIG executives. No doubt whatever is in those e-mails will be used to attack current policymakers and the TARP program, whether or not what they reveal is actually damaging. But the imperative to reveal this information to the public should outweigh those concerns. The three directors responsible for this decision, Jill Considine, Chester Feldberg, and Douglas Foshee, are all former or current Fed officials and current or former employees of financial institutions, which doesn't promise much independence. Still, they ought to hold their obligation to the public higher; no doubt the authors of the op-ed reckon that publicizing their names and bringing the directors' personal reputations into the mix will remind them of that incentive.
This episode also touches on the complete failure of the boards of publicly held companies to provide real oversight for investors during recent decades. I've written before about reformers who try to give teeth and independence back to these boards, but we have yet to see any real corporate governance reform come from Congress' latest regulatory efforts. Perhaps Considine, Feldberg and Foshee will set a good example, or perhaps some enterprising member of Congress will call a hearing and make an example of them. The three testified before the House Committee on Government Oversight in May, but were not asked about releasing the records of AIG's collapse and rescue. Interestingly, they were asked about the minutes of their own meetings and said they were the confidential property of the New York Federal Reserve. Maybe Rep. Edolphus Towns, the committee's chair, should hold another hearing to look into both of these issues.
-- Tim Fernholz
