A Safer Financial System — Try Enterprise Architecture!

An article in Friday’s Post reports that “The board in charge of sanctioning mortgage lenders who violate Federal Housing Administration policies is ineffective and slow at a time when the volume of loans backed by the agency is exploding, according to an inspector general’s report scheduled for release today.” This board has ruled on only 94 cases since October, although 12,641 lenders do business with FHA.

I began to wonder if ANYONE had “the big picture” of how the Federal Government interacts with the financial sector’s myriad actors. While I’d love to see a serious attempt at simulating the overall system, at minimum we need an Enterprise Architecture for the government side. And we know how to do that!

The article continues: “The concern is that some lenders may be using the same abusive tactics that contributed to the collapse of the subprime market and that the FHA may not have the resources or policies to stop them and protect itself against losses. The agency insures lenders against defaults.” So here we go again!

An “Enterprise Architecture” is a set of models of the enterprise showing the relationships between its people, processes, and information. That’s a simple definition – the topic gets into the weeds quickly, as you’d expect from a discipline developed at the Pentagon.

But EA is spreading: the Clinger-Cohen Act of 1996 mandated EA programs at each agency, sponsored by the local Chief Information Officer (CIO). There’s a Federal Enterprise Architecture Framework (FEA) issued by the CIO Council in 1999 to standardize it across agencies. And now OMB requires an EA for funding approval and oversight. And once OMB requires something, it’s really in!

That means we have a language, and a community of those who speak it, that can accurately describe “the people, processes, and information” involved in the oversight of the financial system. With luck, EA might also describe the financial system itself!

And if we had common understandings of how the system works, and graphic displays of the parts and their interactions, and maybe even color coded indications of the competence of the regulators (the Mortgage Review Board would be RED), maybe we’d have a better handle on how to fix it. What a concept!

Just google “enterprise architecture for beginners” for starters.

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