Oversight is necessary for business and government

Many organizations work to take advantage of circumstances in ways that can be deleterious to the public interest. This is true regardless of whether or not they are for profit or nonprofit organizations, and whether or not they have bad (greed) or good intentions (not causing delays to transit service), etc.

Yesterday's Post has two articles relevant to the necessity of oversight. The first is a report, "SEC's Madoff Probe Botched by Inexperience," of the Inspector General's review of the Securities and Exchange Commission's failure to identify the Bernard Madoff fraud despite many warnings. From the article:

In the final words of the report, Kotz provides this answer: "The conduct of the [SEC Madoff] examinations and investigations was similar in that they were generally conducted by inexperienced personnel, not planned adequately, and were too limited in scope. While examiners and investigators discovered suspicious information and evidence and caught Madoff in contradictions and inconsistencies, they either disregarded these concerns or relied inappropriately upon Madoff's representations and documentation in dismissing them. Further, the SEC examiners and investigators failed to understand the complexities of Madoff's trading and the importance of verifying his returns with independent third-parties."

"Inexperience" is a word found repeatedly in the report.

"Because of the Enforcement staff's inexperience and lack of understanding of equity and options trading, they did not appreciate that Madoff was unable to provide a logical explanation for his incredibly consistent returns," is one of many such findings.

The focus on inexperience says more about the incompetence of managers than it does about the performance of staffers. This and many other situations Kotz describes cries out for an explanation -- why didn't supervisors assemble better-trained, more well-rounded teams for this probe? "Junior examiners were overmatched in their interactions with Madoff," according to the report.

It's why we have regulation. But regulation won't work if the regulators are out of their depth, if their skill set is disconnected from truly understanding how the field is supposed to work.

2. Yesterday the Post editorialized about the need for a better regulatory and oversight system for the WMATA transit system, in "The End of 'Trust Us' at Metro: The transit agency needs vigorous oversight -- not the pretend variety. The Post has been editorializing about this for awhile (and so have I, see "Missing the real issue about WMATA").

As the Post pointed out in an article in July, "Sister Transit System Took Steps to Counter Hazard: BART Saw Circuit Problem At Center of Metro Probe," in California the Public Utilities Commission has regulatory oversight of the local transit systems in the state, with special requirements for fixed rail transit systems.

Oversight for WMATA is complicated by the fact that the system operates in three separate "states" (two states--Maryland and Virginia--and one hybrid, DC).

But creating a hybrid regulatory commission as a joint body of each of the three Each Public Service Commissions to handle oversight of WMATA seems workable. Multistate commissions are rare but exist. And it is necessary.

It's not that the people at WMATA are mendacious. They made decisions that they thought were in the best interest of customers in the present--speeding up trains and reducing delays, while not recognizing the potentially catastrophic impact of these decisions in the future, because failing to fully understand, investigate, and cure safety and other system failures ended up killing 9 people and injuring 70.

Independent oversight is a good thing.

See these past blog entries:

-- Will nine deaths lead to a better governance, oversight, and management system for WMATA? Or not?
-- The webpage of the California Public Utilities Commission oversight of rail transit systems
-- WMATA and transit marketing vs. crisis communications