Tags: SEC | White | Dodd-Frank | oversight

SEC's White Pleases House Financial Services

By    |   Tuesday, 06 May 2014 07:47 AM

Securities and Exchange Commission (SEC) Chairman Mary Jo White testified before the full House Financial Services Committee, chaired by Jeb Hensarling, R-Texas, at a routine oversight hearing April 29 on the Commission's budget.

As noted when she appeared recently before a subcommittee of the House Appropriations Committee, the SEC is funded by fees collected from the industry, so the hearing is a mere formality. However, as was the case at Appropriations, this hearing provided an opportunity for members to press the interests of clients and constituents. How else to explain why members ask almost identical questions over and over again to those that others have already asked?

White dutifully repeats the answers. Sometimes the answer is that she conveniently cannot respond, because she is recused from commenting on issues affecting former clients at Debevoise & Plimpton, the prominent law firm where she rose to head of litigation. Intriguingly, her husband, John White, a former division chief at the SEC, currently practices securities law at another leading firm, Cravath, Swaine & Moore.

This writer declared the Dodd-Frank Act "dead before arrival" back in 2010 and predicted that it would never be implemented, much as a series of other "landmark" legislation touted as curbing abuses of financial services companies has never been implemented. If they had been, some of the financial crises that have occurred regularly during the past 40 years might have been prevented or at least contained. Instead, every time there's a crisis, the administration and Congress express astonishment and pass another landmark banking bill.

Thus, nearly all the questions sought to encourage White to help the industry frustrate the "limplementation" of Dodd-Frank, with the notable exception of the Jumpstart Our Business Start-Up Act, which White's predecessor, Mary Schapiro, balked at implementing in evident retaliation for the delaying tactics of House Republicans and some Democrats, and White has enthusiastically complied, for which the members are grateful.

The rest of this article will discuss some examples of members pushing especially hard and repeatedly to enlist White's help in defeating or frustrating Dodd-Frank reforms:

  • Asset managers. Hensarling led off with an aggressive question: Are asset managers unregulated? He elicited from White an admission that the SEC has the authority it needs to regulate asset managers, then thanked White for publishing for comment a report on the industry the Financial Stability Oversight Council completed last fall but did not publish. White seemed to line up with the industry's argument that since asset managers are merely managing the assets of others, they should not be designated as "systemically important."
  • Investment advisers. The ranking Democrat, Maxine Waters of California, challenged White to move forward on a recommendation by the SEC's Investor Advisory Committee to implement section 913 of Dodd-Frank, which calls for the development of a single fiduciary duty standard that would cover both investment advisers and broker-dealers. However Waters' Democratic colleague, David Scott, D-Ga., suggested that the Labor Department is "meddling" in the SEC's "bailiwick" by working on this regulation. White responded that both agencies are involved, and she has indicated that she has communicated the industry position to Department of Labor.
  • Regulation of money funds. Scott Garrett, R-N.J., questioned White on a broad range of regulatory issues, including asset managers and money market mutual funds. White's predecessor, Schapiro, failed to get the SEC to issue stronger regulations for money funds, including capital requirements and restrictions on redemptions, in order to prevent runs similar to those that helped precipitate the 2008 crisis episode. Under White, the SEC has issued a proposal asking for comment on measures that might help prevent runs, but the industry is resisting desperately.

The overall impression of White's testimony is that she has enlisted as an industry advocate as it seeks to block implementation of Dodd-Frank provisions by the financial regulators.

(Archived video, White's testimony and the staff memorandum can be found here.)

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Securities and Exchange Commission (SEC) Chairman Mary Jo White testified before the full House Financial Services Committee, chaired by Jeb Hensarling, R-Texas, at a routine oversight hearing April 29 on the Commission's budget.
SEC, White, Dodd-Frank, oversight
Tuesday, 06 May 2014 07:47 AM
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