Well, while many of us notice, and many of us care, our opinions matter not! President Trump continues to astound citizens with his about-face on Wall Street, now welcoming them with open arms and he’s filling the White House with former TBTF executives and those who defend them.
The revolving door which exists in government and on Wall Street, where the government sends key individuals to government; they serve in the Department of Justice, the Treasury, the Securities and Exchange Commission (SEC), about which I’ve commented many times, just goes on. They serve in a government position knowing that their real reward is coming full circle – they come back home to Wall Street or serving Wall Street via the law firms which pander to them and reap huge financial rewards. Many of us believe that these golden parachutes open the door to placing even more financial insiders in government who in turn are then more favorable to their former Wall Street bosses.
Well, if you’re coming back to play on Wall Street you sure don’t want to alienate your banking buddies there by prosecuting them for fraud and intentional wrongdoing. Heaven forbid you would hold them accountable! From former attorney general Eric Holder, Goldman Sachs’ executives, the Federal Reserve Bank, Lanny A. Breuer, the list is long and goes on and on and on!
The latest in the revolving door soap opera is Mary Jo White, whose work as chair of the Securities and Exchange Commission under former President Obama was a bitter disappointment to those who hoped she would actually enforce banking laws. Ms. White is rejoining the corporate defense team at Debevoise & Plimpton, marking her sixth trip through the revolving door between various government jobs and her former law firm. The law firm represents many major financial institutions under federal investigation, and Ms. White will be assisting these clients to “manage their legal exposure.”
As a continuing irony, corporate attorney, Jay Clayton, President Trump’s pick for chairman of the Securities and Exchange Commission, who has worked extensively with Goldman Sachs, has stated he wants to promote growth by scaling back regulations. He agrees with the President that Dodd-Frank, the legislation passed in the wake of the financial crisis to prevent another one, asks too much of banks.
Ms. White in her audition for the job at the SEC had promised to police Wall Street aggressively, and be “bold and unrelenting.” It might appear that the U.S. Senate was seriously misled by Ms. White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street at the SEC. Ms. White had declared in ethics disclosure forms before becoming SEC chair that she was retiring from her partnership at Debevoise, receiving a lump sum retirement payment of over $2 million. However it looks as if she’s come “out of retirement,” has gone back to Debevoise after her government service ended and kept the money – in violation of what she had agreed to.
So what’s two million dollars on Wall Street? Chump change? What also matters – and matters a great deal – is the record Ms. White had while she was head of the SEC. While she was at the helm, the SEC failed to monitor stock buybacks to prevent market manipulation. It failed to stop the epidemic of granting waivers to companies automatically banned from securities activities after settling cases of civil and criminal wrongdoing. Additionally, she hired a senior Goldman Sachs’ attorney as the SEC chief of staff.
Though White made a big show of fighting to force companies to admit guilt in any settlement, a break from past practice, in reality this tool was rarely used. According to a letter from Sen Elizabeth Warren, of 520 settlements from June 2013 to September 2014, only 19 required admissions of guilt. And in most of those cases, the SEC only asked for a broad admission of the facts of the case, not admissions of specific securities violations.
During her tenure at the SEC, Ms. White repeatedly recused herself from cases, not only because of her past association with Debevoise (which forced recusal from cases involving Bank of America), but because her husband John White worked as a corporate lawyer at another firm, Cravath Swaine & Moore. In her first two years, White recused herself from over four dozen investigations, according to the New York Times. In several cases, this resulted in a 2-2 split on enforcement decisions among the five-member panel, delaying or sometimes ending the offending banks’ cases.
It’s been rumored that firms would try to sign up with Cravath just to knock White out of enforcement cases. Her management was so poor and so obviously avoided holding her cronies accountable that Senator Warren had asked President Obama to fire White last October, saying “The only way to return the SEC to its intended purpose is to change its leadership.”
Senator Sherrod Brown, (D-Ohio) said of Ms. White’s appointment to the SEC, where he stood out as the one dissenter to her nomination, “I don’t question Mary Jo White’s integrity or skill as an attorney. But I do question Washington’s long-held bias towards Wall Street and its inability to find watchdogs outside of the very industry that they are meant to police. Mary Jo White will have plenty of opportunities to prove me wrong. I hope she will.”
She decidedly did not. So why did a lavishly paid partner of a corporate law firm take a lowly paid public servant’s salary? You be the judge. And, why would she return to her former home?
It seems the SEC settles with the guilty banks for settlements rather than prison sentences. Sometime back, reporters Pam Martens and Russ Martens said, “the smooth functioning of the American economy is based on citizen’s having confidence in the country’s leaders … No Federal agency has, to date, done more to drown investor consumer confidence than the crony Securities and Exchange Commission (SEC).”
Under Ms. White’s leadership, our revolving door system is a blatant acknowledgement of crony capitalism. It’s public, it’s nodded to, and the players reap tremendous rewards at the expense of the taxpayer.
It seems that Wall Street will not be held accountable. Quite the contrary, they are filling the chairs at the White House as a reward!