If your blood pressure is already up from the story in today’s newspaper detailing how the Federal Deposit Insurance Corp., facing $92.5 billion in losses from failed banks, “has typically preferred to settle for a fraction of the losses while helping the banks avoid bad press,” better schedule an appointment with the doctor. Mary Jo White, President Obama’s selection to lead the Securities and Exchange Commission, supposed protector of shareholders and markets, is expected to be confirmed by the Senate despite “tough questions” in a hearing today.
White is a classic example of the revolving door between government and Wall Street. She was a federal prosecutor during the Clinton administration and then went to work for Debevoise & Plimpton, a prestigious New York law firm. It was instrumental in defending the Too Big to Fail Banks after they helped bring on the near collapse of the world financial system and the Great Recession, ultimately being rescued by your tax dollars. White acted as a lawyer for former Bank of America Chief Executive Ken Lewis, JPMorgan Chase, Deloitte & Touche, and former Goldman Sachs director Rajat Gupta, who was sent to prison for conspiracy and securities fraud. Other clients of the firm include Morgan Stanley, UBS, General Electric, HCA and Siemens.
The list of cases she would have to recuse herself from is potentially long. The social circle in which she has moved for a decade — and no doubt wishes to return to — is not conducive for curiosity or holding the powerful to account. Indeed, her husband, John White, is a partner at Cravath, Swaine & Moore, another powerful Wall Street law firm representing clients facing SEC scrutiny. John White also sits on the advisory council of the Financial Accounting Standards Board, which in 2009 allowed the big banks to value their assorted hustles however they wished.
Not only that, but Mary Jo White will be collecting $42,000 a month in retirement pay for life from Debevoise & Plimpton. As Bloomberg reported, “This means she has a direct interest in Debevoise’s future profits, and therefore an incentive to help make sure only good things come the firm’s way. Debevoise’s partner-retirement plan is unfunded, meaning the firm pays benefits from its continuing business operations.” Social critic James Howard Kunstler wrote:
A republic with a sense of common decency — and common sense — would have stopped the nomination right there and checked the “no” box on Mary Jo White just for violating the most basic premise of credibility: that trip through the revolving door that shuttles banking regulators from the government agencies to the companies they used to oversee and sometimes back again.
Has there not been enough national conversation about the scuzziness of that routine to establish that it’s not okay? Does it not clearly represent the essence of dysfunction and corruption in our regulatory affairs? Didn’t President Obama promise to seal up the revolving door? So how could Mary Jo White possibly be taken seriously as a candidate for the job?
Along with the retention of Attorney General Eric Holder, the appointment of White is a clear signal that this administration does not intend to enforce the rule of law on Wall Street or among the Too Big to Exist Banks. It’s an outrage and poisonous to the free enterprise system. Where is the angry John McCain now? A Rand Paul filibuster? Or is this just business as usual. Move along. Nothing to see.
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Today’s Econ Haiku:
A sign of the times
Now we have a drone lobby
Don’t fear the Reaper?