BRAINS ON DRUGS….. As Congress hammers out its landmark financial reform bill, one of the most controversial points of debate is the question of where to put the government’s new financial watchdog, the Consumer Financial Protection Agency. Should it be a freestanding agency, like the Securities and Exchange Commission, or rolled into the Treasury Department or the Federal Reserve? Liberal Democrats have argued fiercely for making the CFPA independent, on the theory that an autonomous agency will be more powerful and less vulnerable to pressure from the financial sector. Republicans seem to agree with liberal’s theory, and fear that a freestanding agency would tend toward overregulation. What is really at issue in this debate, as in so many others, is the question of bureaucratic power.
In a probing essay-review in the May/June issue of the Washington Monthly, Steven Teles of John Hopkins University and the New America Foundation uses a new history of the Food and Drug Administration — an agency which for decades ranked among the most formidable in Washington–as a vehicle for exploring why some agencies are granted far more autonomy and clout than others. Delving into Daniel Carpenter’s new book, Reputation and Power, Teles finds the answer boils down largely to a single factor: status. Bureaucracies that are seen and admired as powerful guardians of the public interest are less likely to fall prey to political whims or special interests. Extending these findings to the CFPA debate, Teles argues that, contrary to popular belief, the agency would have more autonomy and regulatory clout if placed inside the Federal Reserve, which is taken seriously by the financial industry and has the reputation and resources to attract top talent. Click here to read a sneak preview of Teles’s treatise, “Brains on Drugs.”