Mary Jo White, The SEC, And The Revolving Door by Rootstrikers
The core purpose of the U.S. Securities and Exchange Commission (hereinafter “the SEC”) is to protect outsiders from insiders. Founded in the wake of the Great Depression in response to “a consensus that for the economy to recover, the public’s faith in the capital markets needed to be restored,” the SEC is intended to ensure that corporations and the financial sector treat everyone else honestly.
Was Ben Graham's big purchase of GEICO shares actually a value investment? Perhaps it was contrary to what many believe. "In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people." -- Benjamin Graham, 1976 Both Benjamin Graham and Warren Buffett can attribute a large part of their Read More
As the SEC’s website summarizes the laws that gave it life,
The main purposes of these laws can be reduced to two common-sense notions:
- Companies publicly offering securities for investment dollars must tell the public the truth about their businesses, the securities they are selling, and the risks involved in investing.
- People who sell and trade securities – brokers, dealers, and exchanges – must treat investors fairly and honestly, putting investors’ interests first.
The SEC’s role is thus necessarily antagonistic to the interests of those entrenched insiders who choose to seek the easiest and least ethical path toward profit. And the SEC’s critical mission means that few if any regulators (other than the Chair of the Federal Reserve) have more influence on financial regulation than Mary Jo White, the Chair of the SEC.
President Obama’s 2013 nomination of Mary Jo White to this high profile position was well received, and White was confirmed by the Senate by voice vote, viewed as uncontroversial and well qualified. White’s voice vote (4/8/13) was merely two months and one day after her nomination was formally sent to Congress (2/7/13),4 a rapid confirmation unusual for a presidency that had been obstructed at historic rates.
Mary Jo White’s quick confirmation seems to reflect the effectiveness of the framing of White as a law enforcer. President Obama’s reference to White’s past service as US Attorney for the Southern District of New York—“You don’t want to mess with Mary Jo.”—has become iconic. The press reaction to the White nomination was filled with expectations that White would serve as “Wall Street’s sheriff:” indeed, a Google search for “‘Mary Jo White’ Wall Street sheriff” produces more than 26,000 hits. The New York Times timeline on her career is entitled “Mary Jo White — From Prosecutor to Regulator: Before President Obama named Mary Jo White to run the Securities and Exchange Commission, she was the top federal prosecutor in New York,” despite the fact that White spent more time at a Wall Street law firm than as a prosecutor.
Thus, when on June 2nd Senator Elizabeth Warren sent a 13 page open letter to Chair White cataloguing why the Senator found the Chair’s time at the SEC thus far to have been “extremely disappointing,” it sent shockwaves. This summary from Politico accurately characterizes the reaction to Warren’s letter:
Wall Street and the White House had a swift and furious reaction to Elizabeth Warren’s blazing attack on Securities and Exchange Commission Chair Mary Jo White: Senator, you’ve gone too far. Defenders of White’s tenure at the regulatory agency said Warren’s 13-page letter attacking the SEC chair raised highly questionable points and badly mischaracterized the actions of a widely respected former federal prosecutor.
As this quote suggests, White’s reputation continues to play an outsized role in defenses of White, even as observers at Bloomberg note that her “two-year tenure heading the securities regulator has been marked largely by discord and paralysis rather than accomplishments.” For instance, the June 8th Washington Post Editorial Board defense of White’s time at SEC led by invoking White’s career in a way that gave the reader no indication that White had ever worked for Wall Street:
MARY JO White is a rarity in Washington — a seasoned federal prosecutor, an expert on securities law and a true independent, in both party registration and attitude. Those attributes made her President Obama’s choice to chair the Securities and Exchange Commission (SEC), the independent agency that makes and enforces regulations for the financial industry.
A deeper dig into White’s career indicates that not only has White’s tenure at the SEC been troubling, it has been a disappointment very much in keeping with her professional track record. Her defenders are right in one very important regard: White has in fact led the SEC exactly as one might expect she would based on her career.
White’s career serves as an emblematic example of what is problematic about the revolving door; indeed, she is also a proponent of the revolving door in her hiring and in her personal statements. Her position on the SEC leads to an insolvable dilemma: her lengthy and lucrative ties to Wall Street lead to justifiable calls for frequent recusal, and her frequent recusals (see Section F) lead to frequent deadlock in the commission, preventing adequate enforcement. White’s tendency to hire people for high ranking jobs at the SEC who are likely to avoid stringently enforcing laws protecting society from the dangers of the insiders and large banks for whom they will go to work for next is emblematic of her ideology opposing strong white collar criminal enforcement.
See full PDF below.