Page 20 - Investment Advisor July/August 2021

PORTFOLIO PERSPECTIVES

By Jane Wollman Rusoff

Former FSLC Counsel Predicts Where Next

Financial Crisis Will Come From

Regulators spend too much time micromanaging and too little preparing
for crises, says Thomas Vartanian.

n the global race to launch quantum
computing — extraordinarily pow-
Ierful and with capacity to defeat the
security protecting everything in digital
form — clearly America, not Russia or
China, must emerge dominant.
“There are huge stakes and econom-
ic risk going forward,” said Thomas
Vartanian, who for 45 years has been an
attorney for financial institutions and
who served in the Reagan and Carter
administrations.
In his new book, “200 Years of
American Financial Panics: Crashes,
Recessions, Depressions and the
Technology That Will Change It All”
(Prometheus, 2021), he explores how
tech will affect the frequency of finan- computers, if you were to run a brute- nology, but in the last 10 years, we’ve
cial crises. Indeed, in our interview, force attack and go through every been losing ground.
Vartanian predicts that technology will permutation possible to try to break the Quantum computing, and technolo-
likely be a cause of the next crisis, a 2048-bit encryption code, it would take gies that don’t even exist yet, will enable
consequence of ever-increasing online 300 trillion years. Quantum computers, the strongest security possible or undo
activity, which heightens susceptibility on the horizon, can move much more all the security that’s been done in the
to “the malicious use of technology.” quickly and powerfully. With one of rel- past. It’s a matter of how these technolo-
In the Reagan administration, atively significant strength, you could gies are used.
Vartanian was general counsel of break that encryption in 30 seconds.
the Federal Home Loan Bank Board; [The implication is] all the security that’s You write there’s “at least a better than
during the S&L crisis, he was gener- protecting every piece of information 50% chance” that technology will be a
al counsel of the Federal Savings and and data in digital form — including all cause of the next financial crisis. Please
Loan Insurance Corp. Retired from the money, value, securities, trading [and elaborate.
practicing law, he is the executive so forth] — can be broken in seconds. Since 1994, when financial institutions
director of the program on financial reg- transitioned from proprietary networks
ulation and technology at George Mason When will quantum computing be in use? to the open architecture of the internet,
University’s Scalia Law School and a law Facebook, Amazon, the Russians, the they were susceptible to hijacking and
professor there. Here are excerpts from Chinese are all scampering to be the other kinds of malicious uses of technol-
our conversation: first to get quantum, which is based ogy. Given that and the inefficiencies of
on a much different technology than software, there’s an inability to stop the
Investment Advisor: You wrote, “The today’s computers. There are huge hijacking of critical infrastructure. The
next technological frontier will increase stakes and economic risk going forward. more we go online, the more susceptible
cybersecurity threats.” Please elaborate. The United States and its allies have to we become.
Thomas Vartanian: With today’s super- remain dominant in the world of tech- We can expect that at some point

18 INVESTMENT ADVISOR JULY/AUGUST 2021 | ThinkAdvisor.com