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The Financial Crisis
Come, let us build for ourselves a city, and a tower whose top will reach into heaven.... (Genesis 11:4)
The Washington Post, one of America's preeminent watchdogs, closed out 2008 by publishing a three-part series detailing the origins, growth and collapse of AIG Financial Products, the once-venerable insurance company's division which developed increasingly complex, risky and internationally entangled transactions. The lucidly written articles explain how an initially modest, innovative business built on using quantitative modeling to reduce risk ended in catastrophic ruin. The series also provided insights into the broader global financial crisis.
As the Post explained, "Many of the most compelling aspects of the economic cataclysm can be seen through the story of AIG and its Financial Products unit: the failure of credit-rating firms, the absence of meaningful federal regulation, the mistaken belief that private contracts did not pose systemic risk, the veneration of computer models and quantitative analysis."
Hubris, greed and an abandonment of basic principles all played major roles in AIG's collapse. A former senior AIG official discussing credit-default swaps stated, "The models suggested that the risk was so remote that the fees were almost free money. Just put it on your books and enjoy the money." The notion that markets could generate "free money" is the financial equivalent of believing in a perpetual motion machine.
The Post series also discussed regulatory and political failures. As the articles explained, when the head of the Commodity Futures Trading Commission "argued forcefully for a public debate about whether derivatives posed an unknown and growing risk to the world's financial system" she was opposed by "More powerful regulators, including Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt... They and others said...her call for action was casting a 'shadow of regulatory uncertainty over an otherwise thriving market.' Greenspan, in particular, argued a free-market view."
The Post series should be closely studied by regulators, political leaders, corporate officials and the Pulitzer committee.
See Washington Post articles
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OMB’s Transparency Successes
OMB Watch spearheaded a broad effort to develop recommendations for the Obama Administration on how "to strengthen government transparency." NGOs ranging from the National Taxpayers Union to Greenpeace, the Rutherford Institute, the Union of Concerned Scientists, Justice Through Music and the Special Libraries Association participated in the project which resulted in publication of "Moving Toward A 21st Century Right-To-Know Agenda."
The publication acknowledges the importance of Data Access and Data Quality. As the Right To Know Community explains, challenges to public use of data "may be summarized as problems of access to information, understanding the information, and quality of the information. By solving these problems of usability, many other benefits would result."
Where the project falls short is in recognizing the substantial successes OMB has achieved over the last eight years in improving government transparency. OMB’s leadership in implementing the Data Quality Act is a major success in advancing the transparency and quality of federal data. Dedicated officials in OMB and throughout the Executive Branch should be recognized for their work in improving information quality.
Government Computer News explained that “when it comes to making information about federal programs and spending available to the public, the new administration might want to acknowledge the groundwork laid by the outgoing administration.” GCN cited OMB’s role in “introducing www.expectmore.gov, www.usaspending.gov, and earmarks.omb.gov, which allow Americans to access and analyze substantial volumes of federal investment and performance information.” While the new Administration can be expected to make great strides in further improving the transparency, accessibility and quality of data, their job will be easier because of the work of their predecessors.
See Moving Toward A 21st Century Right-To-Know Agenda
See Government Computer News story
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