Discouraging the SEC from Attracting the Best

An interesting piece that reaffirms the value of the FOIA was published about the leadership of Henry Hu at the SEC's new Division of Risk, Strategy and Financial Innovation ("Risk Fin").  Henry Hu is a professor at the University of Texas Law School in Austin. 

At the time the Division was created, the appointment of Professor Hu was a bit of a coup.  He has done some exemplary work in the area of derivatives, particularly with respect to the decoupling of voting and economic rights (his SSRN page is here). 

The article, however, notes that the SEC designated Austin as Professor Hu's duty station.  It apparently meant that when he traveled to Washington, he could receive reimbursement for living expenses.  As the article noted, he was reimbursed for his apartment in Chevy Chase, meals, and flights between the two cities.  Specifically, the article noted the following: 

• Travel vouchers obtained by Reuters through a Freedom of Information Act request show that Hu sought reimbursement from the SEC ranging from about $4,000 a month to as high as $8,000 per month.

• From December 2009 through December 2010, the vouchers, stamped as "processed," added up to roughly $80,000, according to the records. The division's total travel budget was about $345,000 in fiscal 2010 that ended September 30.

Apparently this reimbursement has been questioned.  The indubitable David Kotz, the inspector general, plans to engage in yet another investigation. 

At most, this looks like an agreement by the SEC to prevent Mr. Hu from having to pay the costs of two households.  By taking the position in DC, he presumably had to maintain his household in Austin and incur the expenses of living in Washington DC.  Given the limits of government salaries, it does not seem unreasonable to compensate him for the added costs associated with the position.  To the extent that the SEC wants to occasionally attract those from the outside, it will have to make flexible arrangements like this.

The Commission should be congratulated for the effort, not investigated.