Will Obama's Technology Push Extend to Financial Regulators?

By Diane Mueller
January 16, 2009 | Comments: 1

Obama's technology-savvy election team worked very effectively to leverage a new world order of YouTube, social networking, and blogging tools to promote his agenda, connect with a nation of voters, and raise campaign funds. But does he really know what it's going to take to overhaul and connect all the disparate government information systems that the U.S. Federal bureaucracy has built up over the past 200 years? He has certainly raised hopes and set expectations high for both the technology and financial sectors.

Obama's Finance Team Appointments: A Great First Step

Even though SEC Chairman Christopher Cox has been criticized for not paying enough attention to details of the subprime meltdown and other fiascos like the Madoff Ponzi scheme, hopefully his legacy around interactive data (XBRL) and EDGAR modernization will still be preserved. All signs are good so far.

Obama's selection of Mary Schapiro to spearhead the SEC makes sense. As head of the Financial Industry Regulatory Authority (FINRA), her insider's knowledge of the SEC along with her understanding of the need for cross-agency, cross-jurisdictional and cross-borders cooperation is encouraging. In speeches post 9/11, Schapiro talked a good game about applying large doses of technological creativity to resolve the issues that were then plaguing the financial markets and the regulatory institutions. If she brings those ideas and enthusiasm to the SEC and other bastions of federal regulation to break down the information silos across government agencies, markets, and borders, we should be in good shape with XBRL advancement.

Shapiro will also be working with Gary Gensler, former undersecretary of the Treasury for Domestic Finance and Obama's pick to head up the Commodity Futures Trade Commission. You can bet they will be working closely together as both agencies have come under severe criticism in the wake of the financial meltdown. Suggestions of a proposed merger of the two agencies may eventually leave one of them without a job.

In addition, Obama also plans to appoint a new cabinet-level Chief Technology Officer (CTO) to upgrade government computer systems. He wants the nation's first CTO to "ensure that our government and all its agencies have the right infrastructure, policies, and services for the 21st century." The future CTO has the opportunity to be really instrumental in modernizing financial regulatory processes with standards like XBRL by:

  • promoting cross-agency cooperation on standards-based approaches to create a common taxonomy for information sharing;
  • creating a single sign-on world for all government online activities; and
  • working across traditional jurisdictional boundaries to break the federal, state, and municipal information-sharing barriers so that our enforcement agencies can truly share information efficiently and securely.

Moving Forward with Interactive Data aka XBRL

As Obama assembles his financial team, there is excitement about his emphasis on leveraging technology to gain efficiencies in other areas of government. For example, he's pledged to invest $10 billion a year over the next five years to implement standards-based electronic health information systems. Hopefully this is a sign of things to come. This new finance team can restore confidence by leading and accelerating the current federal modernization efforts underway that are using standards-based XBRL technology to help resolve this latest series of disasters plaguing the financial markets and regulatory institutions.

Obama's team should also take a close look at the Dutch and Australian efforts to breakdown the governmental information silos with their move to a Standard Business Reporting (SBR) approach. This SBR approach relies heavily on XBRL technology, or "interactive data," as Chairman Cox likes to call it. The Dutch and Australian governments have recognized the interdependent nature of government agencies and the increased need for information-sharing via a standards-based approach. Targeting financial reporting early, as the SEC has, is a good first step and should be continued. With XBRL projects underway at both the FDIC and the SEC, it doesn't take a genius to see the writing is on the wall -- more cross-agency cooperation and a standards-based approach is needed to drive XBRL forward during the Obama administration.

Beyond securities regulation, federal financial management could also use a creative dose of technology. Obama's new CTO should support the U.S. Government Accountability Office (GAO) and the overall government accounting community in their efforts to prepare consolidated financial statements and to modernize the processes that account for and reconcile intra-governmental activity and balances between federal agencies. Sharing a common data dictionary of all financial terms that can be used across the public sector will streamline financial statements submitted to the U.S. Department of the Treasury and simplify reporting to the Office of Management and Budget (OMB). This information-sharing need not stop at the federal level -- pilot XBRL projects in Nevada and Oregon point to a growing awareness of the potential to cross state and municipal borders too.

As Chairman Cox recently pointed out, "Paper and financial representations of paper can't keep pace with financial engineering and digital capital markets." Hindsight is everything, and perhaps if interactive data had been in place, the Madoff fiasco and the subprime mortgage crisis might have been averted or at least detected sooner.

XBRL technology can help facilitate the detection of such schemes, streamline audit and accounting processes, and help regulators put early warning systems in place. There is lack of confidence in today's market, and the federal government needs to focus on modernizing their infrastructure to build transparency. Migrating financial information to a standards-based XML format will enable faster and more accurate data analysis.

Let's hope that the six degrees of separation from the Madoff scandal doesn't touch any of Obama's nominees and that they all pass the Senate confirmation hearings quickly. Then we can all get back to the important standards development work at hand and provide support for their efforts to restore confidence in our financial market.


You might also be interested in:

1 Comment

Diane,

Very nice article. Another data point that I think will have a huge impact upon the economic reforms proposed by Obama was the recent publication of the Group of Thirty's latest report: Financial Reform: A Framework for Financial Stability. As part of that, the working group headed up by Paul Volcker, Obama's proposed senior economic advisor, produced a set of recommendations that hints strongly at the role of electronic regulation mechanisms as part of a global economic reform effort.

In my estimates, XBRL is going to be a very hot topic this year, and should be huge in 2010 as planning segues into policy and implementation.

News Topics

Recommended for You

Got a Question?