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Rene Stulz, a professor of economics at Ohio State University, is seen in this undated handout image from the Ohio State University. Stulz testified before the U.S. House Financial Services Committee on derivatives regulation in October 2009. A growing number of critics argue that disclosing industry relationships should be mandatory for academics who appear before the people's elected representatives as independent experts.
Credit: Reuters/Kevin Fitzsimons-Ohio State University/Handout
NEW YORK | Mon Dec 20, 2010 12:39pm EST
NEW YORK (Reuters) - When Hal Scott testified on financial reform before the Senate last February, he identified himself simply as a Harvard Law School professor and director of an independent research group.
He also had some other relevant experience: Scott is on the board of Lazard, a prominent Wall Street firm with no small interest in the outcome of regulatory reform. He did not bother to mention this association during his testimony.
Scott, who was paid about $260,000 in cash and stock by Lazard in 2009, did not break any rules by not pointing out his industry ties. The Senate Banking Committee does not require academics to disclose their corporate affiliations.
"My membership on the Lazard board is a matter of public record," Scott said in response to an email request for comment.
A growing number of critics are calling for change. They argue that disclosing industry relationships should be mandatory for academics who appear before the people's elected representatives as independent experts.
After all, these critics say, congressional testimony is a key step in the legislative process and can have enormous sway on policy.
"If someone is presented as a disinterested expert, but they actually have a financial relationship with someone with an interest in what they are talking about, that leaves the members of the public in the dark and sometimes members of the committee as well," said Bill Allison, editorial director at the Sunlight Foundation.
Yet this happens routinely. A Reuters review of 96 testimonies given by 82 academics to the Senate Banking Committee and the House Financial Services Committee between late 2008 and early 2010 -- as lawmakers debated the biggest overhaul of financial regulation since the 1930s -- found no clear standard for disclosure.
In fact, roughly a third did not reveal their financial affiliations in their testimonies, based on a comparison of the text of their testimonies available on the Congressional committees' websites with their resumes available online.
The House Financial Services Committee's rules require disclosure only if witnesses have received federal grants on the subject about which they are testifying.
ONLY HUMAN
How are such experts chosen? Washington insiders say Congressional staffers are deeply immersed in the specific issues they focus on, and therefore know the experts in the field. But as is often the case in U.S. politics, lobbyists try to get certain experts a foot in the door -- usually those whose positions are closest to the firms they represent.
"The two parties choose their own witnesses and so they have a wide variety of viewpoints, often adversarial," said Addie Whisenant, a spokesperson for the House Financial Services Committee. "The hearings are usually quite heated and often revealing. They are also fully public."
Sean Oblack, a spokesman for the Senate Banking Committee, offered much the same view, saying the selection process is intended to encourage a multitude of views.
"The committee closely reviews witnesses' qualifications and backgrounds and seeks to ensure that they are open and transparent," said Oblack.
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