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Actually, it's great that former bank regulators can get rich working on Wall Street

Jonathan Marino   

Actually, it's great that former bank regulators can get rich working on Wall Street
Finance2 min read

The revolving door between Washington's banking regulators and Wall Street's top consulting firms is barely regulated.

It is relatively easy for someone to leap between offices.

While some say this is essential in order to preserve regulators' ability to attract talent, at times consultants have found themselves facing scrutiny.

Consulting firm Promontory, which employs dozens of former government officials, is facing an investigation in New York from Benjamin Lawsky's Department of Financial Services.

Lawsky is examining conflicts of interest between consultants and the banks that they advise. The outcome of the investigation will be closely watched by regulators and consultants alike.

But Promontory isn't the only consulting firm that focuses on regulatory policy for banks, but it is the biggest. Other companies with consulting outfits that have one foot on Wall Street and the other on K Street include PwC and BlackRock.

Goldman Sachs recently made a stink after consultant PwC hired a regulator who had spent his days grilling Goldman Sachs executives and board members on the details of Goldman's business. PwC declined to comment for this story.

Every once in a while, someone will suggest that regulators should not be allowed to take jobs in an industry they were supposed to police.

Erik Erik Gordon, a professor at the University of Michigan's Ross School of Business, says that's a terrible idea.

"If you ban public servants from jumping to the private sector, you turn public service into indentured servitude. You will attract only people who are too selfless to work in the private sector or who are too incompetent."

Gordon says a better idea than an outright ban would be updated rules delaying government employees and former Federal Reserve workers from taking Wall Street jobs.

Meanwhile, says Gordon, there are already clear-cut laws that prohibit former regulators from sharing secret documents that could give banks unfair advantages against regulators (or competitors).

"There is a difference between selling your expertise to a new employer and selling your inside information," he said.

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