Tags: SEC | White | regulations | Dodd-Frank

Parsing Mary Jo White

By    |   Tuesday, 25 Feb 2014 06:39 AM

Securities and Exchange Commission (SEC) Chair Mary Jo White made a major speech Feb. 21 to an annual lawyers' conference slash dog-and-pony show called "SEC Speaks," at which all the key agency staff spend a day hobnobbing with their colleagues on the other side of the revolving door. At the conference, the SEC celebrates itself to an audience eager for billable ideas.

As with all of the financial regulators who failed our nation during the 2008 episode of the ongoing financial crisis, there is no evidence of remorse that this is the agency that put in place a program with the fancy name "Consolidated Supervised Entity," which was supposed to demonstrate that the SEC could supervise the largest investment banks.

At the time, I observed cynically that the means and the culture to provide independent supervision to the clients was totally lacking. The Commission was motivated by the need to free the clients from the threat of stricter regulation by the European Union. Of course, history shows that the program failed spectacularly, and the largest investment banks ended up being bailed out along with the "too big to fail" commercial banks.

Also lost is any realization that this is the same agency that bungled the Bernie Madoff case, even when a whistleblower brought it right to them, that decided to forgo action against a powerful CEO because, according to an email, he had pull and where staff were revealed to be downloading pornography instead of doing the public's business.

On top of this accumulation of institutional failures, White comes directly from heading the litigation department at one of the go-to Wall Street law firms, while her husband has toiled for 25 years at another one of those firms, having interrupted that career to spend two years at the key post of director of the SEC's Division of Trading and Markets.

In fairness to White, the law business/profession is extraordinarily competitive, and one is not just handed these posts or that of U.S. Attorney with jurisdiction over Wall Street itself, where she made her public reputation. She has acted to bolster her credibility by ending the practice of automatically allowing subjects of enforcement to settle with the agency without admitting or denying anything. (Note that all SEC cases are civil in nature, although the SEC has the power to make referrals to criminal enforcement authorities.)

The event took on some extra color when none other than Mark Cuban, an enforcement target for alleged insider trading the intrepid SEC missed, happened to be in town for another meeting and showed up for this one.

White's speech consisted primarily of a laundry list of regulations the SEC has issued under the Dodd-Frank Act. She has bolstered her standing on the Hill by establishing a pattern of meeting deadlines, even if the regulatory product is flawed. For example, the cross-border swap regulations of which White is so proud are a weakened version of rules issued by the Commodity Futures Trading Commission that satisfied the industry demand for so-called "substituted compliance, which allows the agency to accept swaps trading rules that may fall short of achieving actual compliance with U.S. law.

However, with all of the flaws and loopholes in SEC regulations issued under Dodd-Frank, the key point that must be admitted in White's favor is that the spotty implementation of Dodd-Frank she is delivering is just what a conflicted Congress wants, even demands, from the SEC and from all of the financial regulators.

(Copies of several speeches prepared for the conference can be found here.)

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Robert-Feinberg
Securities and Exchange Commission (SEC) Chair Mary Jo White made a major speech Feb. 21 to an annual lawyers' conference slash dog-and-pony show called "SEC Speaks," at which all the key agency staff spend a day hobnobbing with their colleagues on the other side of the revolving door.
SEC,White,regulations,Dodd-Frank
592
2014-39-25
Tuesday, 25 Feb 2014 06:39 AM
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