Occupy the SEC Weighs in on Nomination of Mary Jo White to Head the SEC

Occupy the SEC has released one of its characteristically well-though-out and documented letters, in the form of questions it would like to see raised during the Senate hearings on the nomination of Mary Jo White to head the SEC.

While individuals who have worked with White and are tough-minded about bank reform, most notably Neil Barofsky and Dennis Kelleher of Better Markets, are enthusiastic supporters of White, she has spent enough time in the private sector to raise legitimate concerns about whether she has become intellectually captured. Moreover, her history in working for the last ten years on behalf of large companies may also create such a thicket of conflicts of interest as to hamstring her ability to operate effectively, even if she is serious about compliance and enforcement. The letter also asks White to explain in some detail the incident that many have flagged as troubling, the manner in which she intervened at the SEC on behalf of Morgan Stanley CEO John Mack when he was under investigation for insider trading.

I encourage you read the letter in full.


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    1. LucyLulu

      The letter asks fair and thoughtful questions, IMO. I don’t know about Tim Johnson but the letter was sent to the entire committee. Between Sherrod Brown and Elizabeth Warren, neither of which have been captured by the finance industry and both of whom thoroughly understand the issues at hand, my hunch is that at least some of the topics will be covered, depending upon how much time the senators are allotted to ask questions. Also, Sherrod Brown doesn’t tend to engage in theatrical politicking, and hopefully Elizabeth Warren hasn’t changed and won’t either.

      But……….. Ms White is pretty slick from what I observed in the one video I watched. I’d expect her to field any problematic questions well. Litigators don’t earn high fees and get the top clients unless they’re smooth-talking and quick on their feet.

  1. Oliver Budde

    On January 21 in a comment on this site I was one of several readers who discussed this “incident that many have flagged as troubling, the manner in which [White] intervened at the SEC on behalf of Morgan Stanley CEO John Mack when he was under investigation for insider trading.” My point at the time was simple: the incident showed White for what she really is. Your position at the time was basically that White is esteemed, strong and wonderful.

    You replied on 1/21 to my comment as follows:

    “I spoke to someone who is a law professor, securities law expert and not at all soft on banks or securities fraud (as in he has advised some Occupy Wall Street subgroups informally and I have separately written to him on and off).

    He says Taibbi and you were all wet on this one, didn’t understand the statutes and case law at all. The story had gone cold by the time I heard this, so I didn’t bother taking a pot shot at the story. I am too busy on a current pressing piece to contact the professor and have him repeat his logic and case citations. But if this is what your negative view is based on, you’ve got no smoking gun.”

    Yves, in light of the fact that the letter embedded above demonstrates that Occupy the SEC considers the incident to be of major significance, what should we your readers conclude? Is it your professor friend’s (and perhaps your) position that Occupy the SEC is all wet too, and likewise doesn’t understand the statutes and case law at all? You do say that the letter is “characteristically well-though-out and documented.”

    Allow me to repeat my 1/25 reply to your 1/21 comment to me: I would ask that you take a look at this Senate Committee report from 2007–just search for “White” and read those sections if you are pressed for time–and then tell us if you still feel the same way about this appointment: http://aguirrelawapc.com/global_pictures/Attachment_9.pdf.

    1. Yves Smith Post author

      Just because I featured the letter does not mean I agree with every thing in it.

      I have to tell you, it is routine for people to call someone they know rather than the person nominally in charge of a matter. It is ALSO pretty routine for someone to call a more senior person if they want to get action.

      As far as I am concerned, the problem here is with the SEC. They should have cleared their throat and said, “ahem, please talk to the examiner”.

      1. Phraser X


        Respectfully, do you feel any differently about this appointment, today, than you did, in your earlier response ?

        Reading the 2007 report I come away with the conclusion that financial malfeasance occurred. Do you ?

        If not to the first two questions, then, how do you maintain your conclusions in ?

        If so, then the appointee, White and others, including the SEC were complicit prior to 2007 and the Occupy the SEC questions to Ms. White are legitimate yet far from resolving the concerns.

        * * *

        In closing, do you believe that it is possible to consider the financial industry as operating a public utility ?

        Utilities are reliably profitable, however, they are designed and regulated to deliver reliable, efficient service to all.

        We need far more than ( the head of ) the SEC to perform as a regulator of the financial services industry.

        1. Yves Smith Post author

          Did it not occur to you that White was a Dem appointee and left as the US attorney for the SDNY right after Bush came in? She’d been in the post for 9 years and clearly had no where to go in public service with the Republicans in charge.

          I have not changed my views. You seem to forget that litigators are paid to represent their clients aggressively. She did that in the private sector. She is now 65, which you seem to have missed. She doesn’t have another private sector turn in her.

          The big issues are what her conflicts are and the fact that her husband is in private practice at another big white shoe firm. I’m not troubled by her record, she was doing what she was paid by her clients to do. The law does not demand morality from attorneys. Did you forget that even the guilty are entitled to representation? It expects competence.

          The other issue is that everyone is missing the real play here. The Rs are likely to block ANY Dem appointee prior to June. So they stymie White. Obama blames it on her (someone who looked tough) as opposed to the timing, and then appoints a Shapiro clone.

  2. jake chase

    The SEC has always been Potemkin regulation. The only chairman who would make me feel differently is Bill Black, and he ain’t being considered. Anyone who believes otherwise might explain what has happened to accounting, which has become imaginary numbers hedged in by incomprehensible footnotes. Then, there is corporate governance, which is a sorry joke.

    I know there was one guy back in the eighties who gave some witness a heart attack during a deposition, but what exactly did he accomplish other than that?

    White is just a pip squeak. If she wasn’t female nobody would notice her.

    Moderate this too. I could care less.

    1. Nathanael

      The SEC has only been Potemkin regulation *during our lifetimes*.

      My Dad is old enough to remember the days of Joe Kennedy at the SEC. That was NOT Potemkin regulation.

  3. diptherio

    Regardless of whether or not White would/will actually be an honest and dedicated enforcer at SEC, the potential problems highlighted here and the unquestionable appearance of possible impropriety, confirm my feeling that we need to just straight out ban the revolving door. Brick that f*@ker over.

    Anyone who wants to be involved in regulated industries should have to make a decision: if they want to regulate industry in the public interest, they go into government service, but if they once go to work for a regulated company, they should be barred forever from working in a government agency that regulates their former employer. Everyone should just have to pick a goddamn team and stick with it.

    That may seem a little too much to some. Surely some people can be trusted, surely some allowance must be made for people’s careers, right? I say, NO. Better that we have a simple rule that entirely mitigates these types of conflicts of interest, than to have a more nuanced rule that, while seeming more fair, is also liable to all sorts of manipulation and gaming. The consequences of applying a nuanced “conflict-of-interest rule” incorrectly are too huge to risk (as we should all understand by now). Why even allow for the possibility when I’m SURE there are qualified people out there without any conflicts.

    1. petridish

      Absolutely correct!

      This is a nation of 350 million people and we are supposed to believe that there are only a handful that can do these jobs and that all of them are motivated by only one thing–MONEY.

      Especially in light of what has gone on in this country in the past several decades, there have got to be plenty who would say screw the salary and get to knockin’ some heads–THERE”S where the power would be.

    2. jake chase

      Business regulation isn’t going to work unless and until intelligent and energetic people can imagine government service as a career .At present, It cannot be a career because it doesn’t pay decently at the upper levels. At the lower levels, it attracts nothing but careerists looking for a springboard to something else; at the upper levels you get nothing but industry plants on temporary sabbaticals for the purpose of greasing the skids for industry clients.

      And don’t forget that both Congress and the Courts are now dedicated to undermining every sort of useful regulation, so the net result is an army of paper shuffling clowns pretending to importance and drawing pay while accomplishing nothing except interference with powerless individuals ensnared in a net of counterproductive regulation which simultaneously awards exemption to the powerful and connected.

      1. diptherio

        My father is a recently retired public servant, a civil engineer. He retired as a GS13 and was making $100,000+. That seems plenty high to me, at least it’s in the top quintile of income.

        Entry level government jobs still seem to offer better pay and benefits than the private sector, in general, based on my job-hunting experience. The major headaches that pops experienced working for the Feds weren’t due to low pay, but rather an incredibly slow legal process at DOT in Washington. He wrote citations that didn’t receive action from Washington for years after the fact (kind of a problem when we’re talking about natural gas pipelines).

        1. LucyLulu

          Your father’s pay may have been comparable to the private sector. Civil engineers don’t make 7+ figure salaries (working as employees anyways). But White is an attorney that works in the financial industry. A top attorney in the private sector can clear 7 figures or more, and I’m sure White has. Ditto for C-level bankers. There aren’t any government jobs that pay like that. The president of the U.S. only makes $400K.

          We can argue that these people are overpaid but its the reality that we’re dealing with. If someone is making $200K/yr and gets offered $1M/year, chances are that they’ll follow the money. Rarely do people don’t turn down raises, and especially raises like that. IME, no matter how much money somebody makes, they’d always like to have more.

          1. PaulArt

            We have come to the realm of the ‘National Maximum Wage’. We should have a maximum wage beyond which it is illegal to pay anyone. Salaries in the public and private sector should be equalized to some extent. All these problems come about because of this fetishization of the Private Sector beyond the point of diminishing returns.

          2. Nathanael

            Paul is correct.

            Of course, we had, in practice, a National Maximum Wage under Eisenhower, when income over a certain large amount was taxed at 91% and up. Federally. (State income taxes stacked on top of that.)

      2. craazyman

        there are good people in government whose intellect and ability far surpasses private sector equivalents, even if their pay does not.

        on TV we see the degenerate power hungry whores who somehow make it their life’s work to “rule” over others. I have little but contempt for these personalities — democrat and republican.

        I’m sorry. but politicians do not impress me and power does not and money does not.

        some people are motivated by conscience and craft and have a high belief in the project of a democracy. they are content to live modestly but reasonably well.

        The “private sector” individuals I’ve met along the way are, generally speaking, far inferior to the government workers I’ve known. This is in finance and investments. An avaricious capacity for destruction and speculation is not a talent in my book. Although I acknowledge societies’ prejudice differs from mine.

        The world would be a better place if people could see their demons. They would not be so deluded by them or so enchanted by their own delusions of themselves. But I suppose that’s what life is for. ecce homo

  4. Susan the other

    White doesn’t sound so good. The SEC itself is pretty pointless; it’s doubtful anyone could change the culture at the SEC merely by changing a few rules of procedure. And it is a proven certainty that no hapless agency commissioner can control securities and exchanges. The problem lies with the SEC. Let it be just a registry, wherein vetting is normal but cannot interfere with law enforcement. Put the enforcement of securities law under the FBI. The SEC is useless. It poses a clear and present danger to this country.

      1. Hugh

        As of this writing, the Census population estimator on its frontpage reports:

        U.S. 315,278,255
        World 7,064,345,607
        22:14 UTC (EST+5) Feb 05, 2013

  5. Norman

    Put the enforcement of securities law under the F.B.I.! Unless I’m mistaken, the F.B.I. is a part of the DoJ. Besides, there has to be belt tightening, and where else but in the enforcement department[s], will the hammer fall?

    1. Susan the other

      I think the FBI is part of Treasury so it doesn’t need the go ahead from that quisling Eric Holder, but yes it does need the go ahead from Timmy (what’s the new guy?). Sixes for now. But if securities law became the direct responsibility of the FBI it would be a step in the right direction.

    2. LucyLulu

      The FBI, like the rest of government, is reliant on funding. There have been FBI agents delegated to investigating financial crimes, but insufficient numbers to do any hardcore investigations. Last I heard there were 50 agents assigned to investigating the mortgage crisis. The focus of the FBI has been diverted to national security and fighting the war on terror. During the S&L crisis, a crisis of smaller proportions, 1000 agents were used in the investigations.

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