Mary Jo white spins the SEC'S re­volv­ing door

The Pak Banker - - OPINION - Wil­liam D. Co­han

One of the oft-re­peated jus­ti­fi­ca­tions for why Wall Street must be reg­u­lated by Wall Streeters is that what goes on there is both so com­plex and so es­sen­tial that only those who have been part of it can be trusted to over­see it. This ar­gu­ment is bunk, of course. It's noth­ing more than a way for the fi­nan­cial in­sti­tu­tions, and the many Washington politi­cians who ben­e­fit from their con­sid­er­able largesse, to make sure the sta­tus quo gets main­tained.

White re­sponded that her work rep­re­sent­ing Wall Street "does not change me as a per­son. It doesn't mean I em­brace the pol­icy thoughts of any of my clients." Maybe so, but what White's mul­ti­tude of con­flicts does mean is that she will be re­cus­ing her­self from reg­u­lat­ing at least two of her big former clients -- JPMor­gan Chase & Co. and UBS AG -- for a year or so. She also said she would re­cuse her­self from mat­ters in­volv­ing Cra­vath, and that her hus­band would no longer be an eq­uity part­ner of the firm. For good mea­sure, she told Brown: "The Amer­i­can pub­lic will be my client, and I will work as zeal­ously as is pos­si­ble on be­half of them." We shall see.

As Brown said, there seems lit­tle ques­tion that Mary Jo White is a per­son of high in­tegrity. Yet af­ter nearly eight years of a tooth­less SEC led by Chisto­pher Cox, the Repub­li­can former House mem­ber from Cal­i­for­nia, and Mary Schapiro, who was pre­vi­ously the head of Wall Street's self-reg­u­la­tory or­ga­ni­za­tion, don't we need a chair­man who will not have to think twice about tak­ing on the banks? Don't we need an SEC chair­man who will scare the liv­ing day­lights out of Wall Street, rather than some­one who used to de­pend on it to make a liv­ing? (My choice for the job was former New York State Gov­er­nor Eliot Spitzer, who had a proven track record of stand­ing up to Wall Street as the state's at­tor­ney gen­eral.)

In­stead, we get stuck again and again with peo­ple whose ties to Wall Street run deep. In­deed, the "re­volv­ing door" be­tween Wall Street and Washington seems to have been spin­ning faster than ever dur­ing the first five years of Barack Obama's ad­min­is­tra­tion, con­trary to what can­di­date Obama led us to ex­pect. Is it just a co­in­ci­dence that the pres­i­dent's most im­por­tant eco­nomic ad­vis­ers -- Jack Lew, the Trea­sury sec­re­tary; Sylvia Mathews Bur­well, his choice to head the Of­fice of Man­age­ment and Bud­get; Gene Sper­ling, the di­rec­tor of the Na­tional Eco­nomic Coun­cil; and Michael Fro­man, a se­nior White House eco­nomic ad­viser -- are all acolytes of Robert Ru­bin, the former Trea­sury sec­re­tary and long­time Wall Street hon­cho at Gold­man Sachs Group Inc. and Cit­i­group Inc.?

On the other side of that spin­ning door, is it co­in­ci­den­tal that Schapiro was just nom­i­nated to be on the board of direc­tors of Gen­eral Elec­tric Co.? Or that Lanny Breuer, the out­go­ing as­sis­tant at­tor­ney gen­eral for the crim­i­nal di­vi­sion of the Jus­tice De­part­ment, an­nounced he is re­turn­ing to work at the pow­er­ful law firm Cov­ing­ton & Burl­ing LLP? This is the same Lanny Breuer who, in­fa­mously, told the New York Bar As­so­ci­a­tion in a Septem­ber 2012 speech that "in large multi­na­tional com­pa­nies, the jobs of tens of thou­sands of em­ploy­ees can be at stake. And, in some cases, the health of an in­dus­try or the mar­kets are a real fac­tor. Those are the kinds of con­sid­er­a­tions in white-col­lar-crime cases that lit­er­ally keep me up at night, and which must play a role in re­spon­si­ble en­force­ment." As a fed­eral en­forcer, Breuer lost sleep over the idea that banks might be made to pay for their trans­gres­sions.

Now Schapiro's head of en­force­ment, Robert Khuzami, is leav­ing the government as well. (He was pre­vi­ously -- sur­prise, sur­prise -- gen­eral coun­sel for Deutsche Bank AG's op­er­a­tions in Amer­ica.) He hasn't an­nounced his next job, but one sus­pects that the one-year "cool­ing off" pe­riod re­quired by the SEC, dur­ing which he can­not di­rectly lobby the com­mis­sion for a client, won't di­min­ish his job prospects or use­ful­ness to Wall Street.

I could go on and on and on. But you get the point. At­tor­ney Gen­eral Eric Holder con­firmed to Congress on March 6 some­thing that we all have long sus­pected: Wall Street has be­come too pow­er­ful to pros­e­cute.

The un­ex­plained mys­tery is why Obama keeps go­ing back to Wall Street for ap­pointees to im­por­tant reg­u­la­tory po­si­tions when there are thou­sands of qual­i­fied peo­ple else­where who un­der­stand how Wall Street works and would be fear­less in hold­ing it ac­count­able for its bad be­hav­ior.

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