Thomas H. Stanton

The Importance of Legitimacy in the Government's Response to the Financial Crisis

The Elliot Richardson Lecture American Society for Public Administration National Academy of Public Administration ASPA National Conference Miami, Florida March 22, 2009 It is a great honor to join you today to present the Elliott Richardson lecture. I was a young public interest lawyer when Mr. Richardson resigned in 1973 as Attorney General of the United States on a matter of principle. In those years of Watergate and Vietnam the legitimacy of government actions was widely questioned. “Don’t trust anyone over 30” was a rallying cry for many young people at the time. Elliott Richardson, a distinguished public servant and definitely over 30, showed us that integrity and courage are appropriate at any age.

Lessons Learned: Obtaining Value from Federal Asset Sales

If the government decides to sell assets, how can it obtain full value? Four case studies provide valuable lessons: (1) sale of the Elk Hills oil field by the U.S. Department of Energy, (2) sales of loans and property by the Resolution Trust Corporation (RTC) after the savings and loan debacle, (3) loan asset sales by the Small Business Administration (SBA), and (4) excess property sales by the Defense Reutilization and Management Service (DRMS). The federal government should create an office to assist agencies that seek to develop effective asset sales programs.

The growing movement for enterprise risk management in government: the United States begins to catch up

After lagging the United Kingdom and Canada in managing risk of government agencies and programmes, the United States is beginning to catch up with action by a small and growing group of government officials seeking to apply a management approach known as “enterprise risk management” (ERM). Too often, information is bottled up in the middle or lower ranks of an organisation. In response, ERM seeks to open channels of communication so managers have access to information needed to make good decisions. Rather than limiting the focus to specific identified risks, ERM asks the larger question: What are the risks that could prevent my agency from achieving its goals and objectives? Recognising the value of ERM in improving government management, US central organisations – the Office of Management and Budget and the Government Accountability Office – are now working to institutionalise the new movement, which in the US government began from a confederation of officials across multiple government agencies rather than as a mandate from the top of an administrative hierarchy at the centre of government. This reflects the peculiar “stateless” aspect of US public administration.

Leverage and the Regulatory Process

Regulation is a tool of government to help shape private behavior to meet public standards and carry out public purposes. Government uses regulation to correct market imperfections such as inadequate disclosure to investors or consumers, unfair shifting of costs to external parties such as when manufacturing firms adopt inexpensive means of production that result in costly pollution for other firms and people, or prejudice against disfavored groups—traditionally minorities and women—who then are excluded from participating in markets or activities on the basis of equal opportunity. Government also uses regulations to achieve social ends, such as by providing a government hiring preference for veterans or requiring a set-aside in government acquisitions for small business vendors. Finally, government uses regulation to standardize its own procedures in areas such as civil service, procurement, and budgeting.

Accountability of government sponsored enterprises

Government sponsored enterprises (GSEs) are federally chartered, privately owned institutions that benefit from the perception that the government stands behind their financial obligations. GSEs provide large amounts of credit to selected constituencies such as farmers, home buyers and students. On the other hand, GSEs lack sufficient accountability to the government and taxpayers that create and subsidize them. Three elements of accountability deserve attention: (1) assure that GSEs are well capitalized and properly supervised to protect against unnecessary financial risk; (2) authorize continuing independent analysis of their public benefits and costs; and, (3) provide for an exit strategy so that the government can withdraw its sponsorship once a GSE outlives its public purposes.