Volcker’s Observations on Financial Regulation:
Volcker noted significant support for reforming the government’s financial management system, despite resistance to change from individual agencies. He recalled past conflicts between the Treasury and the Comptroller of the Currency during his time at the Treasury in the early 1960s. Volcker emphasized the laxity of the Comptroller of the Currency in regulating banking practices, leading to complaints from Chase Manhattan during his tenure there.

Silver Market Crisis:
Volcker recounted an incident during his chairmanship of the Federal Reserve in January 1980, when he received an urgent call from the chairman of Bates, expressing concerns about the impending bankruptcy of the company due to the rising price of silver. Despite lacking the authority to close the silver market, Volcker attempted to gather information from the chairman of the Commodity agency, who refused to disclose confidential information. Fortunately, the silver market stabilized, preventing Bates’ bankruptcy.

Challenges of FSOC:
Volcker discussed the ongoing negotiations surrounding the Financial Stability Oversight Council (FSOC), highlighting two main concerns. Some argued that the Secretary of the Treasury had too much authority, potentially politicizing the agency, while others felt that the Secretary’s authority was insufficient. Volcker emphasized the need for cooperation between government agencies, particularly during crises, and suggested a balanced approach where the Secretary of the Treasury could lead meetings and set agendas but not directly participate in decision-making.

Silver Crisis and Speculative Assets:
Volcker recalled the silver crisis, where the price of silver spiked from $4 to $50 per ounce due to a market cornering attempt by Bunker Hunt. The sudden drop in silver prices from $50 to $14 within a week led to a surge in people selling their silver heirlooms for profit. Volcker highlighted the importance of considering the complexities of dealing with speculative assets during such crises.

Volcker Alliance:
Volcker explained the motivation behind establishing the Volcker Alliance, an organization he founded. He emphasized the long-term perspective and focus on public policy issues that guided the organization’s formation.

Princeton’s Woodrow Wilson School:
Princeton University had an undergraduate program called the Woodrow Wilson School that combined economics and politics, emphasizing independent work. The school later received a substantial gift specifically for training in public service but diverted the funds to other departments.

Harvard’s Kennedy School:
Harvard Graduate School of Public Administration was similar to Princeton’s Woodrow Wilson School. Over time, politics and economics took precedence, leading to a shift away from public administration. The Kennedy School was established with the aim of modernizing education for public service, but it faced financial challenges.

Centers and Public Administration at Harvard:
The Kennedy School established numerous centers focused on public policy, Asia, South America, and non-profit institutions. Despite the proliferation of centers, public administration and public management remained undervalued.

Decline of Federal Civilian Employment:
Federal civilian employees have remained at around two million for the past 50 years, despite a significant increase in government size and real spending. The Defense Department outsources $400 billion of expenditures to address the shortage of public administrators.

Lack of Public Trust in Government:
Rob Johnson expresses his concern about the declining trust in government, attributing it partly to management inefficiencies and difficulties.

Contractors vs. Civil Servants:
Johnson highlights the increase in contractors employed by the government, surpassing the number of civil servants. He observes that Washington, D.C., benefits economically from lobbyists and contractors, blurring the line between the two groups.

Efforts to Re-Engage the Academic Community:
Johnson seeks to re-engage the academic community in addressing management issues in public administration. He collaborates with deans of leading schools to discuss ways to improve the curriculum and address the tenure issue for professors of public administration.

Lack of Tenure for Public Administration Professors:
Johnson emphasizes the absence of tenured professors in public administration at the Kennedy School for decades. He notes that younger teachers lack job security, affecting their morale and dedication.

Endowment for Graduate Program at Princeton’s Woodrow Wilson School:
Johnson highlights the endowment of nearly a billion dollars for the graduate program at Princeton’s Woodrow Wilson School. This endowment enables the school to hire numerous professors of economics, raising questions about the utilization of these resources.

Outsourcing in Government:
Johnson acknowledges the potential benefits of outsourcing but stresses the importance of skilled personnel to effectively select, monitor, and manage outsourced services. He mentions a request from GSA to conduct a study on the qualities civil servants should possess to enhance outsourcing capabilities.

Curriculum Development for Public Management:
Johnson proposes a collaborative effort with leading schools to develop a curriculum focused on public management, including aspects related to outsourcing and procurement. This initiative aims to improve the quality of education and address the challenges in managing outsourced services.

Presidential Mandate and Civil Service Quality:
A government can have either a narrow or broad mandate, and the quality of the civil service can vary. Some people who disagree with a narrow mandate try to achieve it by destroying the training and quality of the civil service, which leads to distrust in government. A quality civil service is essential for an effective government, regardless of its mandate.

The Military as an Example:
The U.S. military is a large bureaucracy with a narrow mandate, but it has paid attention to recruitment and training programs. As a result, the military has a strong pool of talented individuals who can effectively manage and administer complex operations.

The Presidential Management Fellows Program:
The Presidential Management Fellows Program was created to attract talented young people to government service. Participants in the program receive accelerated training and development opportunities, which prepare them for leadership roles in government. However, the program has declined in recent years, and it is no longer as prestigious as it once was.

Recruitment and Employment Challenges:
The government often has difficulty recruiting and hiring qualified personnel due to inefficiencies in the process. Many talented individuals are unwilling to wait months for a job offer, so they pursue other opportunities.

The Importance of Well-Trained and Well-Paid Public Officials:
Well-trained and well-paid public officials are essential for an effective government. A narrow mandate with well-trained and well-paid public officials is a healthier system than one with a broad mandate and incompetent and undernourished public officials.

Recent Crises and Government Failures:
Recent crises, such as Hurricane Katrina and the implementation of Obamacare, have highlighted the need for a more effective government. These crises were partly due to inadequate training and staffing in relevant government agencies.

The Role of Congress and Financial Agencies:
Congress often gets involved in government operations and can hinder flexibility and effectiveness. Financial agencies, such as the Federal Reserve and the FDIC, are exempt from some of these challenges and are generally able to recruit and retain qualified personnel.

The Lack of Attention to Government Effectiveness in the Presidential Debates:
During the 2016 presidential debates, there was no discussion about the efficiency and effectiveness of government. This suggests that neither candidate was particularly concerned about these issues.

Public Trust and Government Efficiency:
Rob Johnson highlights the importance of an effective bureaucracy for a president to succeed, emphasizing the need for a well-functioning government. Elizabeth Warren is mentioned as an example of a politician who effectively addressed the issue of government dysfunction, quoting Ronald Reagan and advocating for “good government.”

Infrastructure Challenges:
Infrastructure development is often seen as a solution to various issues but faces significant planning and implementation challenges. Johnson raises concerns about the Keystone XL Pipeline project in South Dakota, highlighting the difficulties encountered despite extensive planning.

Collaboration with Top-flight Schools:
A question is raised regarding potential collaboration between the Volcker Alliance and top-flight schools like Schar School of Government and Policy at George Mason University. The importance of working with institutions dedicated to public policy education and research is emphasized.

Ethics and Public Policy Education:
The issue of ethics in public policy education is addressed, with a focus on how to address the challenges of students witnessing elite policymakers using government as a stepping stone for personal gain. Rob Johnson acknowledges the complexity of this issue and the lack of an easy solution, but recognizes its relevance to the broader problem of a rigged system.

Government and Private Sector Interaction:
Johnson discusses the need for individuals with diverse backgrounds, including those from the business sector, to serve in government positions. He notes that some individuals find government service to be a fulfilling and rewarding experience, while others may view it as a temporary opportunity for personal advancement.

Addressing Ethical Challenges:
The Volcker Alliance plans to study the issue of ethics in government and explore potential solutions to address the challenges faced by students and educators in public policy. Johnson mentions President Trump’s focus on tightening conflict-of-interest rules and the need for further examination of this topic.

Revolving Door in the Congress:
Congressman leaving office to pursue more lucrative and influential lobbying jobs highlights a problem in the U.S. government.

Engaging Young People in Civic Education:
Importance of involving young people in discussions about governance and civics from an early age. Junior State of America and similar organizations promote civic education and engagement.

Contracting Out Government Functions:
Contracting out government functions leads to higher pay for contractors compared to government employees. This incentivizes government employees to leave for private sector jobs, leading to a loss of expertise and experience in the public sector.

Cashing in vs. Selling Out:
Changing attitudes towards leaving government for private sector jobs, from being seen as “selling out” to “cashing in.” Need for a reevaluation of the ethics and incentives in the system to better serve the public.

Defining the Safety Net in Advance:
Discussion on whether to wait for the next financial crisis to define the perimeters of the safety net or to do it in advance. Dodd-Frank Act provides a liquidation formula for large, bankrupt financial institutions, but its effectiveness remains uncertain.

International Cooperation in Financial Regulation:
The need for international cooperation in dealing with failing financial institutions due to their global reach. Positive developments in the United Kingdom and the European Union in addressing financial regulation.

Same Liquidation System for Britain and the US:
A common liquidation system between Britain and the United States would address 85% of the systemic financial crisis issue. This is because these two countries account for a majority of the world’s financial transactions.

Controversy over Bankruptcy Law:
Some conservative Republicans argue that bankruptcy should be handled through the courts rather than through the FDIC. However, the FDIC is specially equipped to handle bankruptcies of financial institutions.

Non-Banking Institutions:
The bankruptcy law procedure can be extended to non-banking institutions as well.

Two Philosophies on Crisis Management:
One philosophy is to pour money into the crisis and worry about moral hazard later. The other philosophy is to not extend special arrangements for banks to other entities and to address specific issues like excesses of short-term financing.

Addressing Runnability Problems:
The cascading panic caused by a financial crisis is often triggered by a run on banks. To minimize the runnability problem, the distinction between banks and non-banks could be retained by regulating the banking system more strictly. This could encourage some of the financing currently taking place in non-banks to return to the regulated banking system.

Importance of Personal Incentives:
Personal incentives play a crucial role in preventing financial crises. The symposium suggests examining personal incentives, not just structural issues, to find ways to attract and retain talented individuals in government service. Providing scholarships for long-term government service with a requirement for further service could be a productive program to explore.

Challenges of Government Bonuses:
The Federal Reserve’s experience with bonus systems highlights the challenges of rewarding government employees fairly and effectively. Giving bonuses can create morale problems and a sense of unfairness among employees who receive different amounts. The symposium discusses the difficulties of determining appropriate bonus amounts and the potential negative consequences of the bonus system.

Lack of Implementation of Incentive Compensation Rules:
The failure of agencies to implement the 956 incentive compensation rules mandated by Dodd-Frank is seen as the greatest single failing of the Dodd-Frank structure. The 956 rules, which were required to be implemented 18 months after enactment, remain undone, showcasing the industry’s continuing influence and power.

Suggested Changes to Pay Incentives:
Proposing that CEOs and senior executives’ compensation be locked up long-term, with no clawbacks and deferred until several years after leaving, could radically change incentives and align them with long-term performance. This approach would motivate executives to focus on long-term goals rather than short-term gains, mitigating the risks associated with upfront-motivated incentives.

Challenges in Implementing Financial Reforms:
The implementation of the Great Volcker Rule faced delays due to differing perspectives among multiple agencies involved. Despite the legal requirement, the Federal Reserve lacks a vice chairman for supervision, hindering effective oversight and transparency.

Insider Trading and Principal-Agent Problems:
Research indicates that top executives in large banks were selling their own portfolios as the banking crisis approached, highlighting principal-agent problems within banks. This behavior parallels the events leading to Glass-Steagall, where bank executives were found to be selling stock short during a crisis.

Financial Engineering and Economic Growth:
The contribution of financial engineering to the global economy has been questioned, with some arguing that the value added to GDP has tripled in 30 years primarily due to increased salaries. The correlation between financial engineering and economic growth appears negative, with more engineering leading to slower growth.

The Death of Two Romances:
The pursuit of unfettered free markets and the belief that government can fix everything are seen as two romances that need to end. The Volcker Alliance aims to promote pragmatic solutions that acknowledge the limitations of both approaches.

Government Administration Challenges:
Despite the desire for a more efficient and effective government, many conservatives believe that increased efficiency would only lead to more negative outcomes due to the presence of progressive ideologies.

Infrastructure Project Cost-Benefit Analysis:
The $10 billion project to bring Long Island Railroad trains to Grand Central and the $10 billion expansion of the Second Avenue subway are examples of large infrastructure projects in New York City. Questions remain regarding the cost-benefit ratio of these projects and how to prevent political decisions from influencing infrastructure location and design.

Infrastructure Needs and Lack of Progress:
Despite the enormous infrastructure needs, progress on crucial projects, such as a new tunnel under the Hudson River, has been lacking for 20 years.

Appreciation for Ongoing Work:
Kevin acknowledges Rob Johnson’s ongoing efforts at the Institute for New Economic Thinking, highlighting the beauty of embracing challenges at this stage of life.