[jyl]

I think this is not a PARF topic.

The question is, should government regulators of an industry be recruited from the industry itself?

(The immediate context is the brewing fight between Warren and Clinton on who is appointed to the various financial and economic positions in a Clinton administration. But this is an issue that comes up in every administration, and will come up in a Trump administration if there is one.)

To be concrete, should Wall Streeters be appointed to regulate Wall Street?

On the one hand, some industries are extremely complex and there's probably a good chance that no one outside of the industry actually understands the ins and outs well enough to intelligently regulate it. The derivatives market is not well understood by anyone who has never worked in it, etc.

One the other hand, the "revolving door" between industry and government creates a a lot of conflicts and coziness. I think particularly of generals awarding major contracts and then getting lucrative jobs with the contracting companies.

I remember well the events in 2007/08. I think part of the reason why the Bush administration was able to take very fast and decisive action to prevent our financial system from a massive meltdown was because in Paulson and Rubin were from Goldman Sachs, they were extremely aware of what was going on and why, and they had both the stature and the connections to get the government and the financial industry turned away from the abyss. If, let's say, Elizabeth Warren had had Paulson's job and Bernie Sander had had Rubin's job, I think we'd have all been burning our furniture for heat.