Ethics and the Regulator

May 27, 1994

Questions about Bank Commissioner Margie Muller's solicitation of funds from credit unions she regulates may constitute an ethical violation, but not necessarily of the kind that can be handled by the State Ethics Commission.

There does not appear to have been anything venal or corrupt in her financing a subordinate's trip to a national convention through contributions from regulated institutions. It may simply have been a matter of thoughtlessness. But in that thoughtlessness lies an important lesson.

Ms. Muller did not benefit directly from the $1,200 raised from several credit unions. Nor is there any evidence in the public realm that there was a quid pro quo in return for sending Assistant Commissioner Perry McAtee, who directly supervises the state-chartered credit unions, to a conference of regulators in Hawaii. It's still not clear why the state agency could not come up with the money, but it didn't. So what's the fuss about?

First, it's about appearances. It is always a bad idea for a public official to solicit money, however innocent the purpose, from people over whom the official wields power. People receiving such a request, and others learning of it later, can not be sure if a refusal would lead to retribution at a later time. Or would compliance lead to favored treatment? The only way for public officials to make sure problems like that do not arise: never solicit funds or suggest contributions. Period.

Second, as Marylanders have learned to their sorrow in the past, some state regulators don't always maintain a sufficient arm's-length relationship with the people they regulate. More often than not it is just a matter of innocuous socializing. Particularly in specialized areas where officials are recruited from the industry because they have the necessary experience and knowledge. But that can lead to unduly cozy relationships, and even an attitude of protectiveness when stringent supervision is called for. That was an important contributing factor to both of the state's savings and loan scandals in the past 30 years.

At best, Ms. Muller's call to a credit union that was operating under special supervision of her office reflects a mind-set that could become troublesome. Perhaps her comfort level as a regulator is too high. Whatever the State Ethics Commission ultimately decides, Ms. Muller needs to ponder the broader lesson.

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