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December 7, 2015

Global Future of Governance: International Financial Regulations

Georgetown’s Global Futures Initiative closed the semester with a panel discussion that broached subjects ranging from financial regulation to moral responsibility and even technological innovation. Moderated by McDonough Professor Reena Aggarwal, the conversation centered loosely on issues of financial regulation in international business. Cindy Hallberlin, whose past experiences include serving as the chief ethics and compliance officer for U.S. Foods in the wake of an international fraud investigation, rightly noted that the primary function that regulations is the protection of consumers.

Shen and Hallberlin agreed that regulations mean little in the absence of culture-based norms around compliance and Ms. Hallberlin emphasized the importance of empowering bystanders to speak up about observed violations of regulations.

Gjata challenged the suggestion that there are bad actors in social and economic organizations, offering instead an explanation of deviance based on systems-level analysis. She further explained the shift in 1975 that restricted the domestic ratings agencies to the “Big Three”—Standard & Poor’s, Moody’s, and Fitch Group—and the oligopolistic impact that had on the market.

Bynum described the work that the Office of Financial Research (within the Department of Treasury) is doing to promote systems-level analysis of financial markets. Prior to the 2008 financial crisis, there was little oversight of the market as a whole, and regulation was handled in a diversified manner across the government’s varied departments. Since its inception, the Office of Financial Research works to analyze the country and global economy holistically to ensure that systemic problems are anticipated and prevented.

Aggarwal presented what is perceived as a principle obstacle in financial regulations: balancing innovation with the need to protect consumers. Gjata argued that the perception of tension is, at least sometimes, a “false dichotomy.” Throughout history, Gjata claimed, regulations have spurred innovation, not just detracted from it.

The conversation broached a range of important issues that are relevant both to domestic, and to global, financial and economic regulations. Regulations, while directed towards the benefit of consumers and citizens, are chiefly handled at the governance level. So, while community-input is relevant and important, most regulations transcend the level of the average citizen.

That global governance is critical was embedded throughout this panel discussion. The need for regulations that balance the competing interests of liberal society with the need for protection necessitates more conversations like this one.

Jenney Shen is the vice president for customer account risk management at Fannie Mae. She is responsible for customer credit risk management for the top national lenders and bulk loan transactions.

Joris Gjata is a Ph.D. researcher at the University of Virginia. She is working on the sociology of how financial regulation indirectly affects society. 

Nicole Bynum is the chief operating officer with the Office of Financial Research at the U.S. Department of Treasury. She manages the infrastructure of the office, including strategic planning, financial management, program management, human resources, governance, contract administration, facilities, and records management. 

Cindy Hallberlin is the chief operating and integration officer with the American Diabetes Association and the former president and CEO of Good360. She was brought on as the chief ethics/compliance officer for U.S. Foods, where she created and implemented a values-based ethical culture and comprehensive compliance program. 

Reena Aggarwal is the Robert E. McDonough Professor of Finance and director of the Georgetown Center for Financial Markets and Policy.