Looks like the fix is in, again

President Obama has announced Mary Jo White as new head of the Securities and Exchanges Commission, focusing on her past position as US attorney and her reputation as a tough prosecutor. Since the SEC oversees the operations of many Wall Street activities, this person is someone whom the public would look to to ensure that the rules are followed and that the rights of ordinary investors are protected from the predators who run the big banks and investment houses and which have so far failed at the task.

So will White be a new broom that will clean up the mess? I doubt it. Given that Obama’s people Eric Holder and Lanny Breuer in the Department of Justice have been so reluctant to aggressively prosecute the big fish of Wall Street who were responsible for the financial collapse of 2008 that ruined so many people while they escaped unscathed, what are the chances that he sought a person who would do that to head the SEC?

White seems to be of the Breuer variety, someone who goes back and forth between working for the government and working on behalf of the companies that the government is supposedly overseeing. Her mindset seems to such that she too will not seek to put major Wall Street executives behind bars.

But it’s her more recent stint as a private-sector lawyer that alarms some investor advocates, specifically her defense of some Wall Street titans. In November, JPMorgan settled with the SEC. Years earlier, White represented Ken Lewis, then chief executive of Bank of America, as he faced a civil fraud lawsuit.

During a recent event at the New York University School of Law, White, 65, delivered a measured assessment of how aggressively prosecutors should pursue Wall Street, telling the crowd that it’s important to “distinguish between what is actually criminal and what is just mistaken behavior, what is even reckless risk taking” and “not bow to the frenzy” that demands handcuffs on Wall Street executives.

Of course she does not want to put Wall Street executives in handcuffs, although that is what the government aggressively seeks to do with almost every other category of crime. After all, such people are her friends and clients and possibly future employers. The fact that Obama picked her soon after she made such a statement is telling. The government has effectively granted this special class of people immunity from prison, and thus practically guaranteed that there will be little change in the way they do business. The government prefers to put in jail high-profile individuals like Martha Stewart and Bernie Madoff who are not part of Wall Street because in the public’s eye these are the elite and such actions provide cover for the fact that the government is shielding the real elite, the top people at the big financial institutions like Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Bank of America, and the like.

Matt Taibbi also thinks that her selection indicates a sell-out. He says that after being US attorney, White has been working for more than a decade at the elite law firm Debevoise and Plimpton that specializes in defending big Wall Street firms. He points to her role in a specific case. While working for that firm, she was instrumental in squelching an SEC investigation by Gary Aguirre into future Morgan Stanley CEO John Mack’s role in insider trading, the very crime for which the government threw the book at Martha Stewart even though her actions were small potatoes in comparison.

Taibbi details how that one case that provides a classic example of the revolving door that breeds corruption.

It didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as “smoke” rather than “fire.” White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street . . .

Aguirre didn’t stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. “It all happened so fast, I needed a seat belt,” recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal.

It got worse. Not only did the SEC ultimately delay the interview of Mack until after the statute of limitations had expired, and not only did the agency demand an investigation into possible alternative sources for Samberg’s tip (what Aguirre jokes was like “O.J.’s search for the real killers”), but the SEC official who had quashed the Mack investigation, Paul Berger, took a lucrative job working for Morgan Stanley’s law firm, Debevoise and Plimpton, just nine months after Aguirre was fired.

The fact that White may at one time have been a tough prosecutor is of little value. Once you have joined one of these high-priced law firms that defend major clients who are themselves involved in all manner of dubious practices, you are hopelessly compromised. You can never go back to being a principled defender of the public good because you have become a member of the in-group of Wall Street and government insiders who protect and do each other favors. What are the chances that you will poison the well that you drink from by aggressively going after those whom you will seek to rejoin once your stint in government ends? It is like losing your virginity. You can never get it back.

Once again, I would be absolutely delighted to be proven wrong.


  1. says

    Once you have joined one of these high-priced law firms that defend major clients who are themselves involved in all manner of dubious practices, you are hopelessly compromised.

    Wait what? So every firm lawyer is corrupt? Defense law makes the attorney defense team criminals themselves? This attitude seems fundamentally antithetical to the American system of justice. People have a right to a lawyers. Representing a scumbag doesn’t make you a scumbag, and tarring lawyers with the deeds of their clients is not exactly helpful. Hey, maybe she was instrumental in helping her client avoid prison. That’s what a good lawyer does. That doesn’t make her the criminal.

    Also this attitude that a “revolving door” breeds corruption just guarantees you’ll never have talented people anywhere in government. Yes, there is movement between those that represent and work for industry, and those who regulate industry. It’s the only way you find people who know how things work in the industry being regulated. If situations arise where they have a financial incentive or conflict with a former client, they should of course recuse themselves. But this idea that just working for industry permanently makes you evil is just tiresome and juvenile. The idea that previous employment by a corporation makes you a permanent loyal drone is unrealistic.

    If she has done something as a government official that suggests she’s failed to address conflict of interest, that would be something. That she has represented her clients effectively in the private sector is upsetting to me as a citizen because I want these guys nailed too, but I’m not upset with her for being a good lawyer. I’m pissed the system isn’t tightened so that these guys can hire a good lawyer and avoid prison.

    What we really need is someone in the regulatory position who is aware of these loopholes, strategies, and manipulations. And, knowing how wonderfully mercenary lawyers are, I wouldn’t be surprised if she does a great job screwing with her former colleagues.

  2. baal says

    I understand that Mary Jo White is also of substantial wealth. I’d like the $$ people regulated by someone with normal American person level money troubles. I suspect that being one of the monied elite makes you more likely to overlook malfeasance what’s otherwise considered normal for that peerage.

  3. Crip Dyke, MQ, Right Reverend Feminist FuckToy of Death & Her Handmaiden says

    There’s actual research that shows that people with money are more likely to engage in certain kinds of unethical and illegal behavior – and to rationalize it as not merely ok, but not actually what the law/moral principle is supposed to prohibit.

    It is argued that this is because of a thought process along the lines of, “Well, I got to be in charge of all this wealth for a reason. It must be because they trust me to make good decisions. Therefore, what decisions I make will be good. QED.”

    I don’t remember how well the causal hypothesis was, but it was established that taking for oneself wealth/resources that didn’t belong to you was more common among the monied. I won’t look it up now, but if someone needs a citation, I’ll try to get one.

  4. Pierce R. Butler says

    MarkH @ # 4 – Nope, you just hit the “1st comment by this person must be approved individually” rule here (Singham’s rule, not all of FtB’s).

    … White, 65, … What are the chances that you will poison the well that you drink from by aggressively going after those whom you will seek to rejoin once your stint in government ends?

    Which leaves open the possibility that, having already reached nominal retirement age, White may be ready to leave the revolving-door carousel and cap off her career by winning strong public approval. This is a slim straw, almost completely overshadowed by the proven corruption of the man who picked her, but possibly enough to give her a little doubt from which to draw benefit.

  5. says

    Ah, I was surprised. I didn’t think I had linked anything or said any of the trigger words.

    I don’t buy this idea that somehow someone with her credentials couldn’t join any firm she wanted, whether she screwed with them or not during her civil service job. They’ll happily hire an adversary that screwed them in the past because, hey, they must be good at their job. You guys are making a bizarre argument that lawyers somehow are too loyal, that they’ll serve a corporate interest long after they’ve parted company, or that they care about losses to other lawyers personally. I think that’s nuts. Lawyers don’t give a damn about any of this. They are mercenaries.

    The revolving door issue is also totally overblown. I know people who move from academia, to industry, to government, or from firms to government, yada yada. Peoples’ loyalty is to themselves, lawyers especially are very mercenary, and true expertise is rare. I don’t see former corporate membership or defense work as any kind of disqualifying criteria for a lawyer. If they know their job and are good at it, they’ll be an asset anywhere they land.

    Now, a lobbyist on the other hand, that’s a different beast. If you had told me she was president of xyz lobbying for whatever cause, then I think that’s much more fishy because it suggests the position will serve a specific ideological bent. But some of the best prosecutors are former defense lawyers, some of the best defense lawyers are former prosecutors, and some of the best public-interest and civil servant lawyers are former corporate lawyers.

    Worse, I see this kind of argument all the time from cranks, especially with regard to drugs, GMO/agriculture, devices etc. The problem is, to find people that are knowledgeable about these things and these industries, you almost invariably will end up with experts that have one time or another had dealings with industry, had a start-up, developed a drug, developed a technology, etc. Famously, Dan Burton kept rejecting IOM expert opinions because he wanted them to say something bad about vaccines because he’s an anti-vax crank. Every time they didn’t, he dismissed it because they all had conflicts of interest, and they were all just beholden to industry, blah, blah, blah. The hysterical result was he finally got the IOM to create a review panel without conflicts and it contained no experts!

    Of course, they confirmed the exact same things (they were still scientists after all), but it didn’t satisfy old Dan Burton who still demanded they disclose everything ever. Eventually the IOM gave up and said that there was just no way you could find an expert reviewer who had never had any dealings, grants etc., with industry.

    Conflicts of interest aren’t the end of the world, if you live long enough, you end up with all sorts of conflicts. They shouldn’t be a disqualifying criteria for talented people, because talented people with expertise in a given field will almost always have them.

  6. Mano Singham says

    I would like to think that what you say is true but how many cases are there of people going from the government to the private sector, then re-joining the government and taking strong action against their former private sector colleagues and employers? We have plenty of examples of people doing the opposite.

  7. markhoofnagle says

    I’m not sure that you do. The example I’ve seen most recently surrounded Obama’s appointment to FDA in charge of AG Michael Taylor, and all the anti-GMO cranks started going crazy. But the more I looked into it, the more it appeared that there was nothing there. Yes, he worked for a law firm that represented Monsanto. Every time an issue came up that he had a conflict in, he recused, and he’s generally seen as a very effective regulator who has done a great deal to increase food safety. What are some Obama administration examples of the revolving door serving previous employers? I’ll give you that the Bush administration was particularly terrible about putting lobbyists in charge of regulatory agencies, not to mention generally incompetent morons. Where have Obama’s appointees been failing in COI?

  8. Pierce R. Butler says

    markhoofnagle @ # 7: Where have Obama’s appointees been failing in COI?

    Ever heard of a guy named Timothy Geithner?

  9. Mano Singham says

    You can see a list of all the Obama appointees who have been through the revolving door here. The list also flags the lobbyists among them.

  10. markhoofnagle says

    A singularly unconvincing list. Max Cleland? Kathleen Sebelius? Panetta? Vilsack? Childress? Elena Kagan? Lot’s of padding here, and lots of talented people I’m happy to keep in government. Some 150-180 names are in the executive office of the president, and when examined have no lobbying history or were “lobbying” for Obama during the campaign. How can you be in the revolving door just because they worked for the Obama campaign? A lot of the “revolving door” jobs involved progressive special interests like environment or consumer protection. In some cases I can’t believe anyone would complain about these people. And what’s wrong with Tim Geithner? He was head of the New York Federal Reserve before Obama’s administration, he’s a banker, so what? Who else are you going to find to run treasury or the fed, or any of these other financial institutions that don’t have experience in banking, or that haven’t at some point worked for a financial firm or law practice? Names are listed multiple times. Did you even read any of this list before linking it? It’s an argument for a revolving door, or at least not caring about it.

    This is just one of those issues that I find completely pointless and overblown. Who cares if people worked in industry, or for a law firm? Lot’s of these lobbyists are lobbyists for progressive causes, not for industry. And how callous is it to assume that once someone has worked in the private sector they’re somehow permanently stained corporate automatons?

    Give me a break. You couldn’t fill these positions from non “revolving” positions based on whatever lame definition this list uses, and you wouldn’t want to because no one would know what they’re doing.

  11. Mano Singham says

    Geithner was hardly just a mere banker. As head of the New York Fed he had an extremely cozy relationship with the big banks and investment houses and was tied to what Wall Street was doing in the years up to the crash and then as Treasury Secretary in protecting them after the crash. You can read about him here, here, and here.

    The notion that one needs to look to Wall Street and the firms that serve them to find qualified people to head important government regulatory bodies is part of the problem. There are plenty of career people in government who have spent their entire lives serving the public interest. There are former politicians (e.g., Russ Feingold) who don’t become lobbyists. Why not pick from among them? The reason is that both the Democrats and Republicans want to keep Wall Street happy.

  12. markhoofnagle says

    Ok, take Geithner as a fail, even if I still think the case against him is still pretty weak (and Taibbi, while a talented writer is kind of a schmuck). Do you also object to Max Cleland being able to decide where to place battle monuments? Or think that Sebellius is anything less than an extremely talented, useful public servant? The revolving door list is full of names of good people. If this were seriously used as a criteria for hiring, we’d lose dozens of talented individuals (not to mention the padding in the list).

    I’m not saying there shouldn’t be scrutiny for COI, but the assembly of this list shows yet another unsophisticated attempt to smear, well, everyone in government. I feel sorry for any poor bastard that wants to serve their country, if just for having worked in the private sector they’re smeared this way.

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