Earlier this week, the Wall Street Journal published an op ed by Clinton-era SEC chairman Arthur Levitt, attacking Elizabeth Warren for allegedly undermining the SEC in doing its job by criticizing its chairman, Mary Jo White. Since Warren has been shellacking the agency for repeatedly failing to get out of bed, it’s hard to see her criticism as interfering with the SEC’s performance, since the agency appears to be getting not very much done to begin with. But you’d never get a clue as to how derelict the SEC has been in performing its duty rom the aggrieved tone of Levitt’s piece. Here’s his main beef:
But now, by her own actions, she risks undermining the Securities and Exchange Commission, the agency charged with protecting the investing public. She recently called for the dismissal of SEC Chairman Mary Jo White because Ms. White has chosen not to devise and enforce a rule that Sen. Warren favors—a rule that would require companies to disclose their political donations.
Now here is the priceless part: As you can clearly see from the letter embedded at the end of this post, Levitt himself engaged in precisely the same sort of behavior that he has now deemed to be utterly unacceptable when the likes of that pesky Elizabeth Warren does the same. You’ll see Arthur Levitt signed a missive that takes Mary Jo White to task for failing to implement a rule on public company disclosure on political donations. And not only did Levitt sign it, but so did another former SEC chairman, Bill Donaldson, and a former commissioner, Bevis Longstreth.
So get this: it’s OK for insiders to criticize other insiders as long at it’s a mere wet noodle lashing and goes nowhere, which is what a letter from former SEC commissioner has-beens amounts to. But God forbid someone who has actual power make demands.
Now admittedly, Warren has gone further than other critics of the SEC in calling for Mary Jo White’s ouster. But Warren has repeatedly asked for information and explanations from White for her failure to implement various rules, particularly ones mandated by Dodd Frank, where the agency is clearly well behind on delivering. And it’s not as if White has ever bothered giving the impression that she is dealing in good faith with Congress and with Warren in particular. White goes into unconvincing bureaucratic mumble-speak when grilled; as a former litigator you know she knows better (while Janet Yellen, who is an economist rather than a regulator by background, does a plausible job of playing deer in the headlights with Warren).
The other reason Levitt’s criticism is hypocritical is that he complains about Warren demoralizing the agency. Huh? It’s demoralizing to work for a body that doesn’t execute on its stated mission. As recently retired SEC staffer James Kidney described at some length, the SEC has many career employees who are dedicated to the idea of enforcing the law, and how he specifically was undermined in investigating Goldman’s CDO by political appointees like Robert Khuzami, the head of enforcement. As Kidney said in his widely-reported farewell speech:
For the powerful, we are at most a tollbooth on the bankster turnpike. We are a cost, not a serious expense…The system is broken.
Plus let’s get real. Mary Jo White is a lame duck. She will offer to resign to the incoming President. So no one at the SEC is going to take a further swipe at a chairman already regularly depicted in the press as ineffective as all that meaningful. Levitt would have been on better ground for criticizing Warren for grandstanding, which she is. The demand that White resign is to throw a marker down to the new President that Warren is prepared to go to war to get a better replacement.
So why is Levitt rushing in to try to protect White? Was he put up to it by members of Team Clinton, who are starting their range war over financial regulator appointments early? Or is Levitt in defending the SEC chairman’s supposed prerogative to pursue “a fixed agenda” even in the face of abject failure to enforce the law, because White has devoted inordinate amounts of time defending his pet bad idea, that of competition among exchanges?
Remember that Arthur Levitt came from the American Stock Exchange, and therefore wanted to strengthen the position of his former charge. He was responsible for Rule NMS, which gave us dark pools, high frequency trading, and the worst possible market structure. Every successive SEC commissioner has defended Rule NMS despite the fact that it has little to recommend it and lots not to like about it. And White has committed significant resources to data gathering exercises when many experts view them as excuses to defer action in the hope that the furor driven by Michael Lewis and other HFT critics died down.
Or perhaps we should just look for the obvious answer. As one reader who has done time inside the Beltway noted:
I’m confused. He was for it a year ago and now he’s against it cuz Hillary got a lotta $ from companies?