The following originally appeared in The Hill.
A shill is a person who helps another person or organization to sell their goods or services, without disclosing his or her close relationship with the seller. Coincidentally, the term dates back roughly to 1913, the same year Congress established the Federal Reserve System.
Last week, former Fed Chairman Alan Greenspan resurfaced to opine in the Financial Times about purported deficiencies of the new Wall Street reform law, which is aimed at reigning in reckless banking. Instead of owning up to the many failures that led to our global financial meltdown, Greenspan gushed with praise for the free-market system, insisting that regulators are incapable of monitoring private markets and regulations are impeding economic recovery.
Greenspan identified himself simply as the former Fed Chair. He didn’t point out that he has deep industry ties, including a consulting contract with Pimco, the world’s largest bond fund manager.
Greenspan played similar roles even before his long tenure at the Fed. He served as a consultant to Savings and Loan fraudster Charles Keating, penning a letter on Keating’s behalf for $40,000, assuring readers that there was no risk in Keating’s banking model. Keating cost taxpayers billions of dollars and served time in prison. Our entire economy suffered. As a government employee, Greenspan continued his attacks on regulation, successfully dismantling the prudential safeguards that had previously kept banking a relatively secure industry. Under Greenspan’s regime, banking became the monster that melted the financial sector and caused the Great Recession.
Greenspan is not the only expert who has advocated deregulation from an apparently neutral perch while failing to disclose a business tie. Economics Professors Gerald Epstein and Jessica Carrick-Hagenbarth recently conducted a study that found a dangerous pattern of academics holding themselves out as unbiased authorities on financial matters, while failing to disclose their relationships with financial firms.
Another such potential conflict was demonstrated on March 30, when economists appeared under the banner of neutral institutions before the House Financial Services Subcommittee on Oversight and Investigations to assail the Wall Street reform act. For example, Dr. James A. Overdahl described himself as Vice President of the National Economics Research Associations. Absent from his testimony: he is also spokesperson for the Principal Traders Group, a lobby that represents high-frequency traders.
Some economists assert there’s no reason to disclose their ties to industry. The Academy Award-winning documentary “Inside Job” spotlights Harvard Economics Department Chair John Campbell and Columbia Business School Dean R. Glenn Hubbard, who doubt there can be any conflict of interest inherent in academic experts being on the Wall Street dole. We emphatically disagree.
We don’t assert these individuals are stating views they don’t personally hold. Furthermore, we don’t claim they’re being paid for their names and impressive credentials. But policymakers and the public should be made aware of these conflicts and potential causes for bias, so they can decide for themselves whether they are shills.
If economists testify before congressional committees, Congress should require that the witnesses submit lists detailing their pecuniary interests (including consultant positions) reasonably related to the issue they are discussing. Those who testify on reforming Dodd-Frank especially should undergo close scrutiny, considering the far-reaching implications that will result from such consequential legislation to everyday Americans.
America deserves to hear economists such as Alan Greenspan and others to proffer their perspectives on financial regulation, without any possibility of being influenced by industry. The stakes are too high.
Bartlett Naylor and Micah Hauptman work for Public Citizen’s Congress Watch division.