It might seem bizarre to solicit the view of a financial regulator on torture. But not only did this happen but the regulator was queried about the real deal, and more than once. The reason in SEC chairman Mary Jo White’s case is that in her prior life, she prosecuted terrorism cases, such as a 1993 plot to bomb the UN. And the tacit assumption was that if Mary Jo White approved of torture, um, the firm handling of foreign fanatics, she’d be tough with crooks in in the moneyed classes too. From FAIR’s blog last April (hat tim Mark Ames):
In a new piece, Time magazine (4/3/14) is trying to show that Securities & Exchange Commission chair Mary Jo White will be tough on crooked bankers. But the example that the piece leads off with as evidence of this is downright bizarre: White supports force-feeding Guantanamo prisoners.
Time reporter Massimo Calabresi cheers White for being tough but not partisan–he notes that “she has also lifted barriers on businesses, to the dismay of some liberals.” But it’s the opening paragraph that really stands out.
There is a room at the US military prison at Guantánamo Bay where hunger-striking Al-Qaeda suspects are strapped to chairs and force-fed through tubes in their noses. Mary Jo White is one of the few outsiders to have seen this in operation, watching as more than a dozen inmates had their meals administered to them. White went to the prison at the behest of President Barack Obama in 2009 to report on conditions there. Rather than confirm allegations of torture from human-rights groups and the UN, she concluded that the force-feedings were humane. And what was her general impression of Gitmo? Sitting in her sprawling, light-filled office overlooking the US Capitol, White sounds like a prosecutor. “It was enormously satisfying to see how well run the facility was,” she says…
Yves here. Read that again. This is not approval of torture by someone who doesn’t know what it looks likes. This is someone who was in the same room when it was done repeatedly and said it was just ducky. And this video would hew very closely to what Mary Jo White saw, since it used standard Gitmo procedures:
Now I have to admit I was taken with the story of White as a tough prosecutor, not based on stories like this (yikes) but on her record at the Department of Justice and the endorsement of people who’d worked with her like Neil Barofsky as well as other respected, skeptical lawyers like John Coffee of Columbia. But we’ve seen the reverse from her so far. Rather than pick someone like Barofsky to be head of enforcement, she selected attorneys who’d represented Corporate America. Her first act in office was to approve lifting of a ban on general solicitation by hedge funds. Outgoing SEC chairman Mary Shapiro refused to touch it, concerned that it would hurt her legacy. Despite the Michael Lewis generated firestorm over high frequency trading, White refused to look at the fact that the SEC caused it (thank you Rule NMS), much the less take meaningful corrective measures.
In an almost unheard of rebuke, a fellow Democratic party SEC commissioner, Kara Stein, has gone to war with Mary Jo White, with the general theme that the SEC is being lax on enforcement. For instance, Stein, backed by Elizabeth Warren, is opposed to the SEC practice of waving additional sanctions that are supposed to kick in automatically in the case of certain types of securities law violations. Stein succeeded in changing procedures so that SEC staff could not issues these waiver on its own recognizance, but needed the approval of the commissioners. She then escalated the matter with fellow commissioner Luis Aguilar by blocking Bank of America’s $16.7 settlement over mortgage-backed securities investor misrepresentations. The SEC and Bank of America finally reached a deal that puts the bank on probation and subjects it to tougher monitoring of conduct than has been the case in past settlements.
What does this incident signify about Mary Jo White, and many members of what passes for the elites in the US? Let us not forget that White was not only all in for waterboarding and force feeding, but her approval for Gitmo was simply assumed. Yet let us not forget its sorry history: it was created to evade habeas corpus requirements, it was full of low-value detainees who happened to be in the wrong place at the wrong time (see Australia’s David Hicks as an example). But rather than admit that pretty much all of them were inconsequential, the US refused to return them to their homes or resettle them for reasons that to this date have not been explained (this seems to be yet another case of a distorted idea of national prestige making a bad situation worse). Recall that Obama had said he’d shut down Gitmo as one of his first actions in office and then repudiated that promise.
Mary Jo White was and presumably still is willing to defend conduct that is a violation of the U.N. Convention Against Torture, which the US signed in 1994. Various experts say that the action revealed in the Senate report on CIA torture merits prosecutions. But someone like White was willing when some US abuses were visible and earning well-deserved international opprobrium, to stand up and help the Administration whitewash them. And while she makes the occasional tough-guy remark, such as her testimony to Congress about private equity misconduct, the ongoing row between White and Kara Stein says that White sees her role as defending established institutions. Insider trading, the one area where the SEC has maintained some muscle, is uncontroversial because pursuing it threatens no one in power.
And in a perverse way, this distortion of enforcement makes sense. For instance, the objection to Stein’s and Aguilar’s efforts to have the automatic sanctions against Bank of America take effect was they were designed to be used only against small fry. In other words, the big boys were assumed to be basically honorable so that no such punishments would ever be necessary. But as anyone who is long enough in tooth knows, the idea that the large and influential should get a pass is an invention of the post Watergate era (see Glenn Greenwald’s And Justice for Some for the long-form treatment). Yes, the powerful often get off because they can pull huge favors and hire better attorneys. But in the old days, the overwhelming majority of people would have seen that as an unfortunate defect of the system that was hard to correct for. And back then, there were also considerable informal sanctions in the upper strata against bad conduct, namely, that you’d be shunned by pretty much everyone in your social circle.
White thus symbolizes the new order. The underlying logic of her implicit defense of Gitmo and her “torture isn’t torture” justification of force feeding is the same reasoning used in some quarters to justify the failure to prosecute bankers: that it would be destabilizing to institutions and therefore potentially to the sacrosanct financial system. That argument is not only an insult to the intelligence of the public (having possible criminals in senior positions puts the bank at risk and erodes confidence and support) but has been shown conclusively in practice to be false. The Bank of England forced the departure of the chairman, CEO, and president of Barclays, and the bank carried on just fine without them. So just as the Minsky dynamic, that stability generates risky behavior, which then leads to instability, so too does the idea that major institutions must be protected at all costs cripples them and de-legitimizes government generally.