Temptation Blurred His Judgment, Idea of Duty

What is government, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: You must first enable the government to control the governed; and in the next place oblige it to control itself.”

--James Madison, Federalist 51

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After 40 hours of public testimony and thousands of pages of evidence in the Assembly’s inquiry into Insurance Commissioner Chuck Quackenbush, no expression comes closer to the core of the issue than Madison’s famous dilemma.

It is tempting to portray Quackenbush as an evil man, but that would be a mistake. He is not an evil man. He is a man with all the frailties and weaknesses that comprise human nature, and one of these is self-interest. He is a man who was approached by friends with a clever plan to “creatively” use the power of the insurance commissioner in a manner that would benefit his own political interest, while ostensibly providing “insurance outreach to underserved communities.” The temptation blurred his judgment, distorted his concept of duty and ultimately rendered him unable to pronounce the word “no.”

From this weakness unfolded the tawdry tale: Legitimate charges against insurance companies were dropped and illegitimate charges were manufactured to compel insurance companies to “contribute” to private foundations controlled by the commissioner’s associates. Meanwhile, the commissioner’s responsibility to ensure that insurance contracts are honored and that representations made to policyholders are truthful went unfulfilled.

The system ultimately worked. We are left with an object lesson in the vital role a free press plays in obliging the government to control itself. And the principal checks and balances within the government, though ponderous, also proved themselves. The Assembly Insurance Committee met not as Republicans and Democrats but as Californians deeply concerned with allegations of an abuse of power within the government.

But the system only worked at great expense, and if we were to stop with these lessons alone, we would repeat the tragedy. Merely changing the commissioner will not be enough if there are structural conflicts of interest inherent in that office, or if the laws are ambiguous enough to allow regulators to step outside of their clearly defined responsibility to enforce contracts, or if the exercise of the commissioner’s regulatory power is hidden from external oversight.

Regulators should not be politicians. The nature of elected office requires prodigious fund-raising and creates political considerations that are dangerous to the impartial enforcement of the law. The commissioner must be insulated and removed from these perverse incentives. Restoring that office as a gubernatorial appointment is essential.

Regulators should not make things up as they go along. When there is reason to believe a law has been violated, there is an obligation to prosecute. Absent such a reason, there is an equal obligation to stand aside. In this case, the commissioner did neither, but rather created a structure of “settlements” outside the law that bore no relationship to the actual contracts and representations made between insurance companies and policyholders. This practice predates Quackenbush, and it must be stopped.

Finally, regulators must act in public view. A whistle-blower first brought the abuses of law to the Legislature, in the highest tradition of public service. But, ironically, she then had to abuse the law by illegally releasing private information. A much clearer distinction must be made between records that involve a legitimate concern about privacy and those that form the legal basis upon which regulatory decisions are rendered, with the latter fully available for public and legislative oversight.

As Madison observed, angels are rare in this world of sin and woe, and it will be all too easy to find a human with the same weaknesses as Quackenbush to replace him--none among us need look further than the mirror. Better it is to recognize this now, remove the temptations we can, and proceed with the American experiment in self-government.

It is a simple matter to enable a government to control the governed: All it takes is men with guns. It is far more difficult to oblige the government to control itself. This experience offers some additional suggestions. We should heed them.