Transparency was a keyword in Obama's run for the office and it's been a critical tenet of everything that he and his administration have spoken about since. The first presidential directives out of the gate for the new administration were focused on transparency and open government. And, it is central to the bailout-stimulus-rescue plans now underway and soon to come.
There are many potential traps in promoting transparency, of course, and each time something seems a little untransparent, the commentators are quick to wave the hypocrisy flag. Putting aside the media's lack of transparency, we want to focus on another aspect of transparency which is this: its ability to keep a clear focus on accountability. If we know what ends are sought and who's responsible for reaching them, then we have a clear roadmap of accountability.
But how do you have a clear roadmap when the thing itself is far more huge than anything has ever been before?
We talked a bit here about the need for clear maps during reorganization where enterprises are shrinking, but we haven't talked at all about the need for clear maps when organizations are growing, or exploding in size.
Take the Federal Deposit Insurance Corporation, whose head, Sheila Bair, has been one of those voices for greater transparency. Yay, Ms. Bair. We've spent a bit of time putting the top levels of FDIC into our US Government Map (go to Federal Agencies, at about 2 o'clock).
Thanks to the careful reporting of Eric Lipton in a NY Times Valentine Day post ("Failed Banks Pose Test for Regulators"), we learn that the work--and the budget--of FDIC increased astronomically from 2007 to 2008. FDIC, which has the thankless task of toxic clean-up of failed banks (and the businesses that led to their failures), had just three failed banks to scrub-rinse-repeat in '07. Number in '08? Twenty-five, or, arithmetic fans, eight times the number it had to launder, so to speak, just a year earlier. Given that, as of last week, thirteen more banks already have failed in '09 (and we're only halfway through February), a whole lot more are landing in FDIC's dirty laundry basket even as we write.
To provide some perspective, Lipton examines just one part of FDIC, its Division of Resolutions and Receiverships, whose 2008 budget was $75 million. The budget for 2009? $1 billion. Let's keep following this through. How does FDIC manage to negotiate the deals that allow billions of dollars in assets to move to higher ground?
It hires people. As of right now (or maybe a few weeks ago), FDIC employs 4800 people, according to Lipton's article. When it was last responsible for the prior big bank horror show in the '90s, it employed as many as 15,000. Given that the mess we're dealing with now is HUMUNGUSLY BIGGER than what transpired in the '90s, shall we speculate that perhaps FDIC may need to do more than triple its size? Will the FDIC grow to 30,000? 45,000?
To meet this challenge, it is only hiring 1500 new people. Lipton reports that $700 million (!) will be spent hiring contractors to provide the warm bodies to do the work. So like so much of the rest of corporate America, FDIC is outsourcing the work to avoid the painful ballooning up followed by the excruciating shrinking that always follows windfalls.
How will FDIC manage accountability across such a fast and vast ramp-up of its capabilities? Accountability is all the more important because of the "army of contractors."
Like the dozens of other agencies whose budgets are about to swell--at the national, state, and local levels, FDIC desperately needs to upgrade its accountability mechanisms. One fundamental way to do that is by establishing and maintaining org charts of the whole organization, which are literally the structure of accountability. We're putting in some time as a start to that process and we encourage FDIC and the other agencies and departments charged with implementing the stimulus and other spending to do the same.
With transparency you can see accountability which (re)builds trust.
