Mary Jo White About to Get Off to a Bad Start

Your humble blogger was surprised when Obama nominated Mary Jo White to head the SEC, since her reputation as a tough prosecutor is at odds with Obama’s well established pattern of catering to banks (the fact that he gives them only 97% of what they want is nevertheless offensive enough to their tender sensibilities). I surmised that there had to be an angle here, and I figured he was up to one of his old 11 dimensional chess tricks. The Wall Street Journal pointed out that the timing of her nomination was off, and that alone could be fatal:

Some observers predicted the White House would have difficulty getting any SEC nominee through the Senate until Republican Commissioner Troy Paredes’s term expires in June, possibly creating an opening for a Republican. Nominees can stand a better chance at confirmation if they are paired with a member of the opposing party. The SEC currently has one empty seat.

But she was approved, and this was even with tough-on-banks types who had worked with her personally, like Neil Barofsky and Dennis Kelleher, being enthusiastic about her nomination. So what gives?

Now I’m not as put off as many are by her picking people who’ve been effective on behalf of corporations to be on her team. Sadly, just as Willie Sutton robbed banks because that’s where the money was, you pretty much have to go to Corporate America to find people who could wrestle them to a standstill (Barofsky himself being a possible exception). Now that does not mean that they will, by a long shot. But it’s not uncommon in deal land for attorneys to land new clients because they outmaneuvered the other side and the client figured it out and decided he better have that sonofabitch on his side of the table next time. And White at her confirmation hearing committed to “to further strengthen the enforcement function of the SEC” in a “bold and unrelenting” manner. The most encouraging sign is that DC law firm Arnold and Porter seems to take what White says at face value in an advisory to clients (hat tip Harvard Law School Forum on Corporate Governance and Financial Regulation):

These recent statements by White and other SEC officials, along with White’s reputation, suggest that there may be a strong enforcement effort in the coming years – and the Obama administration’s budget proposal for FY 2014, which was released on April 10, 2013, indicates that the SEC likely will have the resources it needs to support this effort.

So why would the Senate Republicans not have balked? Well, it looks like she’s willing to carry their water, at least on some issues.

White’s first move looks to be to approves something so rancid that outgoing SEC chairman Mary Shapiro refused to touch it, concerned that it would taint her legacy. From Bloomberg (hat tip Ann S):

U.S. Securities and Exchange Commission chairman Mary Jo White is pushing to adopt a rule allowing hedge funds to advertise in a move consumer advocates say could fail to protect unsophisticated investors, according to two people familiar with the matter.

White, who became SEC chairman on April 10, has suggested the commission pass the existing plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private. The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012…

The rule would lift the ban on “general solicitation,” or using advertising to market investments in hedge funds, startups and other firms. The ban dates to the passage of the first federal securities laws in 1933, said Brian J. Lane, a partner at Gibson, Dunn & Crutcher and former director of the SEC’s corporation finance division.

Shapiro had been initially in favor of allowing for general solicitation until an advisory committee recommended unanimously against it. The four commissioners have since been divided along party lines, with the Democrats wanting to introduce more consumer-protection measures.

The most charitable interpretation one can make is that Shapiro decided she needed to give Republicans this bone in order to get approved (and remember, the SEC is subject to Congressional appropriations, so getting into a pissing match this early could lead to budget cuts which would further weaken the SEC). Bloomberg again:

Approving the regulation would allow White to make good on a promise she made in her Senate confirmation hearing to prioritize rules mandated by the Jumpstart Our Business Startups Act, which was designed to boost capital-raising and job creation.

The sneaky bit here is that by arguing for speed, the Republicans were arguing for implementing the no restriction provision as is. A rewrite would be contentious and therefore take time.

As one Mary Jo White fan said by e-mail:

Ugh. Can’t imagine why she’d want to come out of the gate w/a 3-2 vote, where she’s siding w/the Republican commissioners.

Now enough hue and cry over the rule could give White the pressure or air cover, depending on how cynical you are about her, to be a bit more, um, judicious.

In and of itself, White’s move to appease Republicans isn’t fatal. But it also is clearly not a good sign either. Stay tuned.

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  1. tulsatime

    Nobody that can be confirmed will make any difference at this point. There is no pretence of a real market left to regulate. Whatever scripted actions are trotted out as enforcement theatre will be for public consumption, and possibly low level messaging. The visuals will be promoted for the uninformed, and bidness will be run as usual.

  2. Oliver Budde

    Yves, apologies for sidestepping the main point of this post, but whenever you talk about White, whose appointment you endorsed (surprisingly, I would guess, in the view of many here), you cite Barofsky and Kelleher as also being enthusiastic—the only word I have ever seen you use in describing their positions—about the appointment. But you seem to see something in their statements that I would argue was never there. Dennis Kelleher leads the organization Better Markets. Here is the statement released by Better Markets on April 8 (

    The U.S. Senate confirmed Mary Jo White today as the next Chairman of the SEC by unanimous consent.

    “Chairman White faces two historic and consequential challenges: enforcing the law on Wall Street without fear or favor and thoroughly putting real financial reform into place. Both are essential if the SEC is going to protect the American people from another devastating financial collapse and the economic wreckage it causes,” said Dennis Kelleher, President of Better Markets, Inc., an independent nonprofit organization that promotes the public interest in the financial markets.

    “Unfortunately, the recent record of the SEC has been to establish a double standard where the law is aggressively enforced on Main Street and the wealthy and well-connected of Wall Street get away with meaningless slaps on the wrist. This SEC practice only rewards, incentivizes and guarantees more crime on Wall Street. That must end,” Mr. Kelleher said.

    “Similarly, financial reform has languished at the SEC as Wall Street’s lawyers, lobbyists and other allies have attacked the agency relentlessly. While financial reform hasn’t been stopped entirely, the rules have too often been gutted or weakened by loopholes. That too must stop,” said Mr. Kelleher.

    “Talk is cheap and talk during the Senate confirmation process is often forgotten the next day. That won’t happen here. Better Markets has launched an ‘SEC Watch’ webpage, which is going to track what Chairman White says and what the SEC does under her leadership. We intend to shine a bright spotlight on the SEC for the American people to judge for themselves: did she do what she said she was going to do or not? Over time, this webpage will reveal which side Mary Jo White is on,” Mr. Kelleher concluded.

    The foregoing is hardly enthusiastic support for White. I do not see how you could argue otherwise.

    And here are Kelleher’s statements quoted in a NYT article from January 8 ( just after the nomination of White was announced. Presumably, this was what you saw at that time when first characterizing Kelleher’s view. Again, while this is not exactly an indictment of White, enthusiasm is not the word that comes to mind:

    “I believe she is one of those people who will understand that her public role will be very, very different than her role as a defense lawyer,” Dennis M. Kelleher of Better Markets, a watchdog group, told me. “I don’t think she’s going to be like so many others who don’t get that they have a very different role when they hold high public office.

    “No question, she’s said some things that are controversial and questionable,” Mr. Kelleher said. “Moreover, I hope and expect that she will be asked publicly about them in the confirmation process and that she will have convincing answers.”

    As for Barofsky, I already commented as to his support in one of your earlier posts ( Again, it was not enthusiasm. Rather, Barofsky was merely being politic with respect to the woman who gave him his first job.

    Glad to see you coming out of White’s corner. Thankfully, that didn’t take long at all.

    1. profoundlogic

      Couldn’t agree with you more. I think it’s time we dispense with the gratuitous free-pass of optimism in the face of overwhelming evidence to the contrary. The system is rotten to the core, and to expect someone so conflicted as White to be anything other than what she has become is pure folly. White is the product of a corrupt system, the revolving door where moral turpitude is a way of life.

      1. Susan the other

        Agree. Expecting the SEC to cure its own cancer is folly. The commissioner is merely the goat. Shut down the SEC and replace it with an agency designed to do its job.

        1. banger

          And that agency would do much the same. Unless you start dealing with the source of the massive corruption we face in all sectors of our lives putting various personalities here or there are irrelevant. Let me put it another way. If oligarchs have the power to destroy anyone they chose including assassination then who is in office is not that important. We have to face the fact we live in a Machiavellian world of power-politics where the powerful are willing to commit any crime to stay dominant. Once we realize this is where we live we can take steps to move in an other direction.

          1. psychohistorian

            And hence we need to end the power of the inherited rich, forever.

            Level the playing field and the sociopaths will go away.

    2. Yves Smith Post author

      If you look at my posts, I NEVER endorsed her. I said I was surprised Obama wold pick someone who had a record of being tough, which WAS a lot stronger than anyone he’s nominated for past bank-related agency roles (including Richard Cordray, BTW, whose record is less strong than his PR would have you believe, a lot of kabuki in the stances he took in Ohio).

      As an aside, I find it really disturbing to see the extent to which readers engage in halo effect, which is a cognitive bias. It’s a tendency to see people as all good or all bad (profoundlogic, your comment is a perfect example). That occurs all too often here even with regulators who are credited with having pushed back against banks from disadvantaged positions (being at “secondary” regulators), meaning Sheila Bair and Gary Gensler. The fact that each has made some compromises is necessary in those positions, yet a lot of readers here seem to take the position that unless a person in authority has a perfect record, they are scum. The benchmark, sadly, is Geithner. Anyone who pushes back effectively against the low standard put in place by Geithner deserves support. That’s the only way you move the Overton window back in the public’s direction. I’ve written about my frustration with this before:

      The more insidious type of fallacious argument, and this comes more from established readers than from the probable trolls, is black/white, or Manichean, thinking. Anyone who has studied propaganda will tell you that purveyors of that dark art work hard to eliminate nuance, and force “with us or against us” choices on people when the options are almost without exception more complex…

      …no one in a position of power is going to be pristine….Having influence means making compromises. And even in situations like the Holocaust, it is not as easy to draw bright lines as one might think. One particularly good discussion came in 2001, in an article by Omer Bartov in a review of a book describing how Bulgaria came to be the one Nazi state that refused to turn its Jews over to Germany for extermination:

      But the lesson is not quite so simple or so edifying. For we also learn from such instances that the difference between virtue and vice is far less radical than we would like to believe. Sometimes the most effective kind of goodness – I mean the practical kind, the kind that can actually save lives and not merely alleviate the consciences of the protagonists – is carried out by those who have already compromised themselves with evil, those who are members of the very organizations that set the ball rolling towards the abyss. Hence a strange and frustrating contraction: that absolute goodness is often absolutely ineffective, while compromised, splintered, and ambiguous goodness, one that is touched and stained by evil, is the only kind that may set limits to mass murder. And while absolute evil is indeed defined by its consistent one-dimensionality, this more mundane sort of wickedness, the most prevalent sort, contains within it also seeds of goodness that may be stimulated and encouraged by the example of the few dwellers of these nether regions who have come to recognize their own moral potential. As the great cosmological myth of the Kabbalah has it, the shreds of light that remain from the original divine universe may be collected only from the spheres of evil in which they now reside.

      I did defend White against critics in comments, since their main beefs were: 1. She’d made a lot of money at Debevoise and 2. She’d been aggressive on behalf of a client and jumped ranks at the SEC and called someone she knew personally (the Taibbi article).

      None of those were proofs of much of anything. Her having made a lot of money + her age would actually make her less subject to revolving door (ie she does not have another turn and doesn’t need the money). You want someone aggressive, and she’d been aggressive. She is SUPPOSED to be working for her clients. If the SEC let her go over the head of the person in charge of a matter, that’s the SEC’s fault.

      Kelleher’s entire day job is fighting for better regs. You dismiss his view on her too casually. Ditto Barofsky. Both know her personally and have worked with her. None of us do. And neither is a shrinking violet.

      White has more to gain in terms of legacy by rebuilding the SEC than by being another toady. That does not mean she will do that, but tempramentally, she likes a good fight.

      There have been cases of people who’ve gone from the private sector to public and been effective, notably David Boies when he did the Microsoft case (that was lost in the sentencing phase by the JUDGE, who was clearly ripshit at Microsoft and going to impose tough penalties, but talked to a journalist and was removed from the case for violating journalistic ethics). And Boies is now working for uber pig Hank Greenberg. Top litigators pride themselves on being able to argue either side.

      Her hedge fund move is a bad sign, but it is premature to conclude she’ll be weak on enforcement. She may regard that as a promise she made in the confirmation hearings and would cost her too much to retrade, in terms of Congressmen taking revenge on her via the SEC budget (read Arthur Levitt’s book Take on the Street for how regularly THAT occurs, and the worst offenders were the Democrats!). Nevertheless, it is important to keep the heat on on regulatory matters as well as enforcement.

      1. profoundlogic

        I think you make an excellent point, one my wife would agree with. I’m sure White has some admirable qualities as a human being. I just think it’s pretty sad that we are even having the discussion of whether she’s fit to be a regulator. I think the more pertinent discussion to be having is why this type of revolving-door behavior is still legal? The question shouldn’t be whether her obvious conflicts of interest will affect her job performance. We know they will, and for that reason alone she is not fit for the office she now holds.
        We can discuss semantics all day, but as long as we allow the revolving door to remain open, we are left with nothing but subpar choices and even worse outcomes. If we’re going to continue to lower our standards and accept the least dirty shirt in the room, we deserve the government we get.

  3. Barbara Roper

    As someone who has spent a lot of time trying to convice the SEC that it needs to re-propose this rule to incorporate investor protections, I appreciate your posting this. The Bloomberg article is based on unnamed sources. I’m still hoping that either they got it wrong or that we still have an opportunity to turn this around. CFA, AFR, and AFL-CIO wrote to Chairman White explaining why moving forward without re-proposing would be bad for investors and bad for the credibility of the SEC. You can read the letter here: Thanks for helping to bring additional attention to this important issue.

  4. Fraud Guy- Also

    The push to advertise investments should also be seen in conjunction with the push to allow private equity and hedge funds to be sold to “non-qualified”, meaning retail, investors. With PE in particular, I read this as them having run out of institutional investors to fleece and hence looking for new marks. Advertising is necessary to help find them. Here’s a good article about the pending development:

  5. Bob Swern

    I would like to think that Ms. White is prioritizing the approval of a significant budget increase somewhere near the top of her list of must-haves. (The budget for the SEC has ALWAYS been a hot potato, and excuse number one when it’s come down to the discussion of that organization functioning in a sane and effective manner on behalf of the public, at-large, as opposed to sitting back and having its wings clipped so it may then put forth the excuse of funding constrictions as to why it cannot do its job and is, effectively–along with the DoJ, in general–little more than a massive revolving door and/or the “poster stooge” for Wall Street.) Obviously, one needs the resources necessary to carry out virtually any agenda, with Mary Jo White being no exception to that greater truth. So, I’m in favor of letting her manuever out of the gate, as we follow her very, very closely, of course. Then, if she proves to be offering up more of the same status quo bullsh*t, in terms of what we’ve been witnessing from our government for far too long, make no mistake that I’ll be at the front of the line as far as her list of critics are concerned. But, in the meantime and reiterating, let’s help her succeed; and, in the process of so doing that, eliminate the excuses that will be proferred up if she does not.

  6. diptherio

    I don’t know what you all are so concerned about. Letting hedge funds advertise to poorly informed, un-saavy consumers sounds like a no-brainer to me. It’s [corporate] free speech, what could go wrong? I mean, look at how much good pharmaceutical advertising has done…you know, for the pharmaceutical industry.

  7. Chris Engel

    Can you imagine? Hedge funds have a pretty damn good brand (despite the stats on failure rates and high fees) in terms of return potential.

    Lots of low-information middle class investors will jump at the thought of putting some percentage of their portfolio in with hedgies…

  8. Jackrabbit

    There are many who are quite a bit more skeptical.

    The SEC and other regulators are going after smaller firms. These firms feel the full weight of enforcement. (And that leads to Republicans complaining of too much regulation!) Favored constituencies (like TBTF Banks) get off relatively easy. (This song and dance is, by now, familiar: TBTF Banks are too important and prosecuting them is too costly …)

    So it does not surprise me that she “…committed to further strengthen the enforcement function of the SEC” in a “bold and unrelenting” manner.” Or that a law firm is concerned about stepped up enforcement.

    What has she said about TBTF Banks, Sub-prime and the Global Financial Crisis?

    The Obama Administration doesn’t play 11-dimensional chess with a nomination that is important to TBTF Banks. That kind of ‘special treatment’/sarc is reserved for issues that are important to Joe Sixpack.

  9. Hugh

    Obama would never have nominated White if he or anyone around him thought she was a real reformer. I expect she will, like her predecessor, go after a few insider traders and let all the big fraud and criminality slide.

    Personally, I think our system is too corrupt to keep extending the benefit of the doubt to highly placed members of the elite who have achieved their position and wealth from the very system we want them to go up against.

    There are all kinds of tells here. A real reformer would have a clear agenda. They would have a consistent history of seeking reform (not prosecuted a few cases on the government payroll before going on the corporate dole and making big bucks there). They would appoint like minded people. And they would be willing to fight for what they believe. Does any of this sound remotely like White? I don’t think so either.

    Instead we get someone in bed with the corps with the rep of not only aggressively defending their interests but doing so in questionable and inappropriate ways. Being “tough” is not an agenda, and her first big appointment was another Debevoise and Plimpton guy with an equally pro-corporate and antithetical to reform past. Now she is selling out on her first big policy decision.

    This is the pernicious nature of the benefit of the doubt in the corrupt and corrupting climate of kleptocracy. It makes us hesitate to say that when someone walks like a duck and talks like a duck, has feathers and hung out with ducks for years, it’s a duck.

    1. Yves Smith Post author

      People who have worked with her think otherwise.

      And you forget, Obama chose Elizabeth Warren to start up the CFPB. I am sure, as I said at the time, the play was 1. To get her inside the tent pissing out and 2. They assumed she’d prove to be incapable of managing such a big task (she never run anything remotely that large, and starting up an organization is VASTLY more difficult than running an established agency). So when she failed, as they’d assumed she would, they’d put someone more to their liking in place.

      But then OMG she pulled it off, and they were left with the embarrassment of what to do with her.

      This all boils down to intention, and you presume to know White’s intention when you don’t. She was effective when in public service in the past. She trained an entire generation of prosecutors. I honestly think Obama put her up assuming she would NOT be approved, and then he could put in an obvious toady. But she played the hearings to get approved. So did she sell her soul to get the job, or is she just playing nicey-nicey?

      And notice, per above, Barbara Roper, who is pushing against the relaxation of the rule and is PERSONALLY involved, isn’t sure the Bloomberg report is right!

      I am pushing back simply because the data is not in. Normally I reach conclusions on matters early, but this is a case where I think we need to suspend judgment. Even if White were absolutely, 100% serious about fixing the SEC, she’d need to proceed carefully so as not to have Congress cut off its air supply. So we both need to keep the heat on her and watch for the preponderance of evidence. I may be wrong, but I think she really does want tougher enforcement. The question is how much she is willing to or has to trade in order to get that.

      1. Ms G

        “… I think she really does want tougher enforcement.”

        I must admit that I am at a loss here. Are there any “white” flags anywhere in the record regarding White’s career that affirmatively suggest as much? Other than that “she trained a generation of prosecutors” [to prosecute drugs, narcotics and terrorism cases]?

        1. Yves Smith Post author

          Ms. G,

          I don’t know how many litigators you know.

          Litigators like to win. And it’s a point of pride with them. And Barosfky had only done the sort of prosecuting you sniff at before he was head of SIGTARP.

          And from an ego/legacy perspective, which is more valuable to MJW at this point than money, she’ll get a lot more chops if she is serious about enforcement than not. Moreover, she has announced clearly she WILL be tougher about enforcement and she has tons of proteges and colleagues who will know whether she is faking it or not.

          Now this may all be a headfake. But this dismissal in light of her record is overdone. Barofsky pointed out a just last week at a presentation in NYC that there’s a tradition of prosecutors going to the private sector and coming back to public service as more effective prosecutors.

          So I suggest you sit back and see how this all pans out. There’s a rush to judgment here when conclusions are really premature. And you also need to read Arthur Levitt’s book. Even if she is 100% sincere, Congress is gonna try to rein her in. So you need to calibrate her performance in light of that as well. I think the heat should be kept on her, as with other officials but there simply is not enough evidence yet to reach these conclusions. I think Taibbi as much as he is typically solid, goes overboard about 15% of the time, and his piece on White was simply wrongheaded. But a lot of people seem to be dismissing White as hopeless in light of that.

          1. Ms G

            It seems at this juncture that all people observing Ms. White’s new role as chief of enforcement at the SEC are parsing the same tea leaves and drawing their own conclusions.

      2. Hugh

        I heard the same stuff about Mukasey when he was nominated by Bush to replace Gonzales at the DOJ from people who knew the New York legal scene. He’s a principled conservative who will clean up the DOJ after all the scandals there. As it was, he was every bit as bad as Gonzales only less of an overt idiot.

        I didn’t buy the argument, and formulated my Mukasey rule in response: People with a shred of integrity don’t work for governments and Administrations which have none. White showed up on my radar screen back in the Bush years, and with a lot of red flags. 5 or 6 years on, I’m not seeing anything but a lot of ancient history and wishful thinking about her.

        We have seen the largest frauds in human history going down, and White or at least people hope that White will kind of, sort of tweak the SEC a little. We just can not expect arsonists to put out the fires they started. We can not expect anything like the reforms we need from White.

        1. Yves Smith Post author


          1. You need to read Arthur Levitt’s book. The SEC is subject to Congressional appropriations and Lieberman went hard after Levitt when he was merely pro consumer protection.

          No one can meet your standard. It’s a straw man.

          2. You need to articulate what would be a reasonable standard for fixing a badly broken down agency. IMHO, it would be for her to bring a few cases outside the insider trading space and see them through to trial and fight them well enough to show the SEC is capable of going to court again. One of the things that Barofsky stresses is that prosecutors who set out to win every case wind up being chickenshit litigators. If she takes on cases against big companies and takes some to trial (the SEC does NOT have the budget to litigate every case), that would change how it is seen and also give it a hell of a lot more bargaining leverage in the cases it does settle (as in the companies would know the SEC is capable of fighting, and not just in the business of writing claims).

          That would be real progress and is something she is capable of doing.

          The problem is it typically takes 2 years to bring a Federal case, so it is gonna be at least 18 months before we would see whether she is really changing course on the enforcement front or not.

        2. profoundlogic

          Agreed. In terms of the reasonable standard Yves is looking for, I would propose this…

          If you leave your government post as a regulator, you are subject to a 5-year ban on employment at related firms you oversaw, same for the return trip back to the government post. Again, I find it comical that we’re even having this discussion. It seems common sense has been thrown out the window in the false hope of fixing a broken system. It’s a futile effort. Call it “cognitive bias” if you wish, but I’m a firm believer in human nature.

  10. William Neil

    Well, after reading this analysis, and the convolutions and permutations and possible interpretations, who can blame the “working class” and lower middle class (how high should I go?) for their cultural distractions?

    No clues in her attire, or hairstyle?

  11. Ms G

    It really is inauspicious that White’s first public move as the new SEC Sheriff of Wall Street is to turbo-launch the Jumpstart the Bucket Shops Act. Which was bad enough *with* the hedge-fund advertising regulation in place.

    1. Yves Smith Post author

      1. Barbara Roper, who is party to these talks, is not sure the Bloomberg story is accurate, see her comment above.

      2. White basically had to promise this to Republicans in confirmation hearings. So she may not feel she can afford to cross them this early in her tenure. If there is enough public hue and cry, she’d have more wriggle room.

      1. Ms G

        These are the shackles of compromise — arguably inherent in the system we now have — that inevitably translate into what can most charitably be characterized as ineffectiveness.

  12. Jackrabbit

    The notion that Obama nominated MJW with the hope that she would meet Republican resistance doesn’t make sense to me. And I just don’t see any real parallel to Warren.

    * There was public pressure for Obama to select Warren to setup the CFPB. There was little, if any, such pressure to nominate MJW.

    * The industry made it all-too-clear that Warren was not acceptable to head the CFPB. Her nomination was scuttled even though she had proven herself and raised her public profile. In contrast, MJW sailed thru with unanimous approval.

    How could the Obama Administration have gotten this so wrong? How could Wall Street have allowed this uber-prosecutor to have slipped thru?

    Note: Did she get approved by slyly agreeing to support the HF General Solicitation rule change seems unlikely. First, the Obama Administration would’ve known about/expected that Republicans would ask for such support from any nominee, and second the industry would not make a strategic mistake for a tactical gain.

    Lastly, if Warren was an ‘error’ that irked the financial industry, then wouldn’t the Obama Administration have been doubly careful with nominations thereafter?

    Assuming that MJW is everything that Yves hopes for (and hence her quip that Obama must’ve been playing 11-th dimensional chess), nominating with the expectation of failed confirmation seems rather risky and what ever may be gained would be minor compared to that risk.

    Taking such a risk would simply not have been acceptable to Wall Street.


    So let’s apply Occam’s Razor.

    Firstly, I think we can agree that:
    1) MJW is too savvy to allow herself to be overtly compromised and her reputation tarnished.
    2) The Obama Administration/Wall Street is too savvy to allow a key position to fall into the hands of a real reformer.

    What breaks this Gordian Knot and satisfies Occam’s Razor is this: However serious MJW is about cracking down on Wall Street/TBTF, her ability to change or challenge TBTF-related issues is virtually nil.

    A hobbled regulator?
    As Yves mentioned before (see her link at the beginning of the this post), MJW probably has so many Wall Street-related conflicts that she may need to recuse herself on many issues/cases related to WS/TBTF Banks/Execs (MJW claims this would be a _small number_ of cases/issues but it is likely to be a _large number_ of anything related to TBTF). Thus, a fair amount of decisions may have to be taken by other commissioners or her staff. These are people Wall Street can rely upon (presumably) and their decisions are likely to attract much less scrutiny.

    Then there is the new Financial Stability Oversight Council (FSOC). Apparently, they can step in to overrule any decision that they deem threatens TBTF/Financial stability. (Will we even know when that occurs? see below).

    Thus, MJW can be a regulatory rockstar while TBTF Banks/Banksters are safe from any real threat.

    In many respects, one might draw a parallel between White’s leadership at the SEC and Obama’s leadership at the WH. Both embody a promise of hope and change (because of ‘who they are’). Obama was (conveniently) hobbled first by seeking bi-partisanship and then a Republican majority in the House. White is (conveniently) hobbled by her work with TBTF Bankers and the FSOC. In each case, however, we are lead to believe that they are good people that really, really, really want to effect change and serve the people.


    And consider this:

    Dodd-Frank changed the law so that the SEC is barred from disclosing records or information that have been obtained for uses such as “surveillance, risk assessments, or other regulatory and oversight activities” (they still have to make disclosure to Congress).

    So the SEC (and apparently other regulators as well) has become much more opaque.

    1. Jackrabbit

      My comment is fairly long. Here’s a summary:

      MJW really is the Obama Administration’s true choice and the unanimous confirmation confirms that she is very acceptable to the industry/TBTF firms. She is likely to be sympathetic to issues regarding Wall Street/TBTF while cracking down on abuses/smaller players. In the unlikely event that she has pangs of conscience, her powers to challenge the TBTF orthodoxy are well subscribed by her prior legal engagements and the FSOC.



      Why wouldn’t litigators welcome her choice? Her promised crack-down means more business for them. And why would any litigator talk badly of her when their biggest clients/potential clients support her?

      She probably WILL shake up enforcement and crack-down on abuses. But it is unlikely that she rocks the TBTF boat, and if she does her job right, she will help to send the message that the risk to society of TBTF firms can be managed. This makes her a key “partner” in solidifying Wall Street’s power and privilege.

  13. Gizzard

    Hey, let the hedge funds advertise. It would be great entertainment. You think anyone who is not currently investing in hedge funds will be swayed by their commercials? Its just a way to increase their costs and therefore fees to the current investors. How long will that last. This will be their demise I think.

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