And so on and so forth. In many many states in the USA, the TAF constant code revisions are in violation of states administrative procedural rules, and the updated versions are technically not legally enforceable because the updated material was never submitted for public review, critical feedback through each state, may not have been available to the public, or current versions are not the versions recognized as the enforceable standard by the state depository or librarian services.
** FOR IMMEDIATE RELEASE ***
‘AGENCY CAPTURE’ MAKES PRISONERS OF LICENSEES
VENTURA, Calif. (December 9, 2022) – Nobel-prize winning economist George Stigler coined the term “agency capture.” The nation’s licensed real property appraisers should make a point of learning its definition.
Here’s an example:
An obscure federal agency provides the regulatory muscle for a murky Beltway nonprofit that owns and continually changes a set of copyrighted regulations.
The federal agency pressures state agencies to enforce always the latest version of the nonprofit’s costly regulations on state licensees to the benefit of the nonprofit, a 501(c)(3) whose CEO and favored trustees then travel the world on the proceeds. Some years, the CEO of the 16-employee nonprofit has received compensation topping that of the president of the United States. The nonprofit has accumulated over $10 million in cash and publicly traded securities.
The head of the tiny federal agency is a former employee of the nonprofit. The nonprofit’s rules change so frequently that many states have given up on complying with their statutory
requirements to legally adopt each version of the rules into state law, so they favor the federal minder and ignore their states’ respective administrative laws. Meanwhile, interested citizens must continually purchase, at monopoly pricing, the most recent version of the private rules at the nonprofit’s online store in order to know, and comply with, the law.
The federal agency’s funding is based on state licensing fees, allowing the federal agency to unlawfully bypass the congressional reappropriations process. (In October, the Fifth Circuit
confirmed in
Community Financial Services v. CFPB what we all knew to be true – rogue funding for a federal agency is a big no-no.) The federal agency then shares some of the spoils with the nonprofit in the form of grants, and the cycle begins anew.
In the example above, the captured federal
agency is known by the tortuous name the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. (Compromised government agencies are called “captured agencies” in Stigler’s parlance.) The nonprofit it shills for is called the
Appraisal Foundation. The circle of spoils and patronage is the perfect racket. The arrangement allows the nonprofit foundation to, in effect, exercise the coercive powers of government, and it allows the top employees of the federal agency to enjoy the delights of the private sector.
Were he alive today, Stigler, who passed away in 1991, would recognize this arrangement immediately. As a professor at the University of Chicago, he won the Nobel Prize in Economic Sciences in 1982 and the National Medal of Science in 1987.
His 1971 paper “The Theory of Economic Regulation” contended that regulation didn’t simply arise from a need to serve the public good. Instead, interest groups and political actors tended to exploit the coercive powers of government to shape laws and regulations in ways that benefited them, representing a net loss for society.
Stigler would recognize the pattern seen with the appraiser regulatory scheme over its three-decade lifespan, except the late economist, who spent much of World War II performing computations for the Manhattan Project, would probably find it curious that the two entities would have weakened their milk cow – about 80,000 state licensees they depend on for survival – to the point they have.
The public recently witnessed an agency capture in flagrante delicto as the fallen crypto whiz kid Sam Bankman-Fried was found to have been showering politicians with contributions in an effort to shop for a friendly regulator. FTX’s $70 million influence campaign centered on a tiny financial regulator, the Commodity Futures Trading Commission, and a group of senators on the Senate Agriculture Committee, which oversees the obscure body.
It explains why Bankman-Fried directed donations to the chairwoman of the Senate Agriculture Committee, Sen. Debbie Stabenow (D-Mich.), and its ranking member, Sen. John Boozman (R-Ark.).
The purported crypto billionaire wanted the friendlier regulation promised by the Commodity Futures Trading Commission rather than the heavy-handed approach crypto would have certainly got from its much larger sibling, the Securities and Exchange Commission.
The 700-employee Commodity Futures Trading Commission – small by Washington standards – and its chair, Biden-appointee Rostin Behnam, has had periodic turf wars with the SEC. In a classic example of “scope creep,” Benham signaled he wanted to expand his agency’s regulatory portfolio in order to hold sway over the fast-growing crypto industry. At the same time, the Senate Agriculture Committee saw an opportunity to enhance its prestige, power and – as we’ve now witnessed – political donations.
The influence campaign, funded by a crypto Ponzi scheme, was in the process of striking gold. The former chairman of the Commodity Futures Trading Commission, Chris Giancarlo, organized a meet-and-greet between Bankman-Fried and regulators. Mark Wetjen, a former commissioner, joined FTX in November 2021 as the firm’s head of policy in Washington,
reported the Wall Street Journal. A former attorney with the regulators, Ryne Miller, became FTX’s general counsel.
As the nation’s beleaguered licensed appraisers know, there is nothing new under the sun.
# # #
Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “
The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.
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