It seems like only yesterday that I was warning that Mary Jo White would be a disaster as head of the SEC. But it was actually two and half years ago. I warned that she was just another finance apologist who only went after small banks. I quoted Matt Taibbi then, “Obama is not going to clean up financial corruption by pinning a sheriff’s badge on Wall Street’s protector-in-chief.” But I responded, “Obama would only pin a sheriff’s badge on Wall Street’s protector-in-chief.” But the fact that Obama has only ever been willing to deal with Wall Street with kid gloves will not stop me from pointing out that it’s wrong.
Thankfully, we have Elizabeth Warren. Michael Hiltzik reported Wednesday, Elizabeth Warren Declares War on Mary Jo White’s SEC — and It’s About Time. He noted that she “excoriated White with a 13-page letter that accused the SEC chair of slow-walking desperately needed rules and regulations, reneging on her commitments to ride herd on criminal activity by corporations, and even lying to Warren about the status of upcoming regulations.” Just as we expected. After the fight between Warren and Obama over the Trans-Pacific Partnership, I wonder if Obama will come out and say the truth, “She’s doing exactly what I want: nothing.”
The letter is quite a read. It seems personal. In particular, I was stuck by the following comment. After saying she was disappointed that White hadn’t lived up to here promises at her confirmation hearing, Warren wrote, “We have continued to talk, and you and I met personally on Wednesday, May 21, 2015, to discuss these issues. At that meeting, however, you said little that indicated that you would be changing your practices at the SEC.” I’m sure she didn’t! It is some big bank that is going to give White a job after she leaves the SEC — not the American people and certainly not Elizabeth Warren. Sadly, this was all predicted.
Warren is concerned about a lot of different stuff. What I’m most familiar with is the fact that still, except in the most extreme cases, the SEC is allowing banks to get away with a fine and no admission of wrongdoing. That was specifically something White had claimed she would clamp down on. In addition to this, White doesn’t seem that eager to implement Dodd-Frank. That’s not surprising, because of who also isn’t interested in implementing Dodd-Frank: the people White is supposed to be policing, also know as: her future employers.
One aspect that I was totally unaware of was this thing WKSI: Well Known Security Issuer. WKSIs get to take shortcuts through SEC processes. But they are supposed to only be available to banks who behave. You may remember an article I wrote last week, Prison for Soccer Villains, Fines for Bank Villains. In it, I discussed five banks that had recently admitted to criminal activity rather similar to organized crime. Well, that great team player Mary Jo White provided those banks with waivers so that they could maintain their WKSI status. You know, someone convicted of possessing a joint five years ago, can’t get a job, but banks responsible for billions of dollars in malfeasance can’t be held accountable. That would be unfair! It might also get in the way of Mary Jo White’s future employment.
What’s really interesting about these WKSI waivers for criminal misconduct is that they are a knew thing — the first one was issued in 2013. What it looks like is that the moment that the SEC had to start finding some (big) banks guilty of criminal misconduct, then the SEC figured out a way to make it meaningless. By this kind of reasoning, we could sentence bad bankers to life in prison, and Mary Jo White would be there to waive the penalty.
White has responded. Basically, she says that the SEC is doing great work and Warren is mischaracterizing it. But as Hiltzik pointed out, Warren is hardly the only banking watchdog who is unhappy with White. In fact, he quoted Yves Smith at Naked Capitalism, “White… specialized in empty promises, foot dragging, and financial services cronyism.” Which, as I said, is what Obama wanted all along. Mary Jo White didn’t become head of the SEC by accident; she got the post because Obama knew she would do what he wanted. And that is as little as possible. In that regard, she’s been fantastic.