Matt Taibbi on how the new head of the SEC is just another government crony
I outlined my argument against her here, including her whitewash of payoffs made to get Marc Rich his pardon. But Matt Taibbi even gets her protection of crony elititsts. He writes in Rolling Stone:
Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House
I was shocked when I heard that Mary Jo White, a former U.S. Attorney and a partner for the white-shoe Wall Street defense firm Debevoise and Plimpton, had been named the new head of the SEC.
Mary Jo White
I thought to myself: Couldn’t they have found someone who wasn’t a key figure in one of the most notorious scandals to hit the SEC in the past two decades? And couldn’t they have found someone who isn’t a perfect symbol of the revolving-door culture under which regulators go soft on suspected Wall Street criminals, knowing they have million-dollar jobs waiting for them at hotshot defense firms as long as they play nice with the banks while still in office?
I’ll leave it to others to chronicle the other highlights and lowlights of Mary Jo White’s career, and focus only on the one incident I know very well: her role in the squelching of then-SEC investigator Gary Aguirre’s investigation into an insider trading incident involving future Morgan Stanley CEO John Mack. While representing Morgan Stanley at Debevoise and Plimpton, White played a key role in this inexcusable episode.
Taibbi is in favor of insider trading prosecutions, I am not, The point I am pulling from Taibbi's report is that White protects the crony elitists. The fact that she is known as a "tough prosecutor" means nothing other than that she will go after those not part of the inner elite. She is the worst type of government official, going after those unprotected by the establishment and using every vicious tool at her command to do it.
It's the type of official that the crony-left loves to see in power. White is unprincipled and willing to crush free spirits. Indeed, the crony left is so much in favor of White, Tabbibi was forced to add an addendum to his report to emphasize how evil White really is:
Some people I trust have written in to complain that the Mack incident doesn't encompass White's whole career, and that the mere fact that Obama chose an ex-prosecutor with a record of high-level convictions is a good sign. That may be, and the choice of White may very well represent a departure from the last four years. But White's more recent record -- dating back quite a few years now -- has been as a lawyer earning a huge paycheck representing big banks.
Earlier today, I was talking to a former hedge fund manager, a guy who’s been around on Wall Street but is out of the game now. His point about White is simple and it makes a lot of sense. She may very well at one time have been a tough prosecutor. But she dropped out and made the move a lot of regulators make – leaving government to make bucketloads of money working for the people she used to police. “That move, being a tough prosecutor, then going to work defending scumbags, you can only make that move once,” was his point. “You can’t go back again, you know what I mean?”
Think about it: how do you go back and sit in S.E.C.’s top spot after all of those years earning millions as a partner for a firm that represented Morgan Stanley, Bank of America, Goldman, Sachs, Deutsche, Chase, and AIG, among others? Think that fact that his firm has retained her firm has anything to do with Jamie Dimon coming out and saying that White is the "perfect choice" to run the S.E.C.? Think of all the things she knows but can’t act upon. Could she really turn around and target Morgan Stanley after being their lawyer for all those years?
Irrespective of the Mack incident, which incidentally really was about as bad as it gets in terms of "regulatory capture," America’s top financial cop should be someone who doesn’t owe his or her nest egg to the world’s biggest banks.
A few points on Taibbi's addendum. Taibbi doesn't seem to be aware that White's current spin through the revolving door is not her first. As I reported, White has, 3 separate times, work
It's tragic how the SEC has been reduced to nothing more than another toothless entity. It has betrayed its mandate to the American people.
FDR would be horrified if he could see what it has become.
Face it R2, Obama = Bush on steroids.
He is and has always been a poor judge of character. I doubt he hired her to protect the establishment.
I think there's another problem too. Corporate America and Wall St. are earning record profits, so there's a feeling if "if it ain't broke, don't fix it." But it is broken, badly, and the finance sector is predatory on the rest of the economy. I don't think our Prez has gotten that far in his thinking.
Little hard to follow your reasoning.
She has always protected the establishment including protecting criminal acts.
He doesn't know that? He didn't read her resume? He didn't have an aide make up a list of all the headline cases she had handled?
If he didn't that then it is his fault if she does what everyone expects, protects power and wealth.
It may not be his decision anyway. How many financial advisers in his inner circle -- the ones who came up with a short list with her name on it, came out of Wall Street and will return there with big raises in pay? How many are named Krugman or Sitglitz?
How many of his closest advisors are people who are under water on their mortgages or will never be able to pay off student loans?
If you're going to link to this Libertarian horseshit, you (like Economic Policy Journal) could at least provide the original source, who I happen to respect.
Matt Sr lived on Christopher near Weehawken when he
was a reporter for WNBC-4.
Obviously he had to appoint her. Either he got bullied or blackmailed into it. I don't think for a second that it was a compromise sort of agreement to hire her.
The president is just a puppet and others (like Wall Street CEOs) call the shots. At least this puppet tries to do better than the one that came before him in one way or another.
Taibbi is right here, but too ignorant to see how to take it to the logical conclusion of destroying the federal government and ending the Federal Reserve and freeing money from government control.
Without the government the banks would be forced by the free market to offer services, not just make money for the elite.
So R10, then why the hell did you bring up Taibbi in the first place?
And how is this thread not just one more Libertarian circle jerk?
R10, you have it exactly wrong. The banks are absolutely unregulated NOW. They are committing monumental crimes with impunity. They have been caught laundering money for Al Qaeda - and let off the hook (see "Too Big to Jail" in Salon). When they were regulated well, we didn't have things like them destroying the world economy and needing $800 billion bailouts. Corporations can no more be trusted to regulate themselves than football players can be expected to on the field.
But I bet as a "libertarian" you just loved the scab refs. You people are so simple minded and juvenile and ignorant of how markets really work that you're a joke.
Matt Taibbi is a balding woman-hater who enjoyed many prostitutes in Russia. He despises and mocks middle-aged and achieving women.
I guess Brooksley Born was busy.
Obama has decided to stall/placate Wall Street to effect social change.
As a gay person, I appreciate his commitment to civil rights -- but I'm not sure this is the right bet for the country.
Is it true about the prostitutes?
"The banks are absolutely unregulated NOW."
That's the stupidest thing ever posted. 500,000+ pages of regulatory bullshit equals "unregulated"? No, the biggest banks control the SEC, FDIC, and Congress, and are considered "Too Big To Prosecute...I mean fail".
The regulators are former employees of the big banks. The rules are written to protect the banks. How can anyone say they are unregulated unless they are retarded?
"They are committing monumental crimes with impunity."
Yes, because they control the alleged regulators. The new head of the SEC is a total insider, former banker.
"They have been caught laundering money for Al Qaeda - and let off the hook (see "Too Big to Jail" in Salon)."
That's the tip if the iceberg. Google "revolving door banks government" and see how many millions of articles talk about how intimately involved the "regulators" and the "regulated" are.
"When they were regulated well, we didn't have things like them destroying the world economy and needing $800 billion bailouts."
And when were they "regulated well"? Since the 1800s the banks and the government have been intimately tied. Are people really stupid enough to believe that this shit?
"Corporations can no more be trusted to regulate themselves than football players can be expected to on the field."
Corporations are created by government charter. In a free market, corporations would not exist.
"But I bet as a "libertarian" you just loved the scab refs. You people are so simple minded and juvenile and ignorant of how markets really work that you're a joke."
Your ignorance about how the free market works shows how effective gubmint publick edumakashun has been. You mistake crony capitalism for freedom.
You are sadly misinformed.
WASHINGTON -- Reforms instituted after the financial crisis to prevent future taxpayer-funded bailouts are bound to fail and will likely be weakened within the next few years, the Federal Reserve's longest-serving policy maker predicted Monday.
The stark warning, offered by Federal Reserve Bank of Kansas City President Thomas Hoenig, who's been warning about the rise of too-big-to-fail banks for more than a decade, comes as international regulators finalize plans to increase supervision of and toughen requirements on the world's largest banking organizations as a reaction to the global financial crisis. Rather than break up big banks, politicians decided to simply subject them to more oversight.
Yet debate rages as to whether the requirements are too tough, or not tough at all, and whether regulators will have the backbone to follow through on their commitments. Republicans in the U.S. House of Representatives are trying to dismantle the domestic financial reform law passed last year; banks are screaming that lending will dry up, inhibiting the anemic U.S. recovery; and on the global level, regulators from some countries where large banks dominate the national economy (and thus enjoy overt taxpayer backing) are trying to weaken international accords.
For Hoenig though, the choice is clear when it comes to what to do with the financial institutions that caused the most punishing downturn since the Great Depression: break them up into pieces that regulators can understand and provide a backstop to entities engaged in the so-called real economy -- but allow those dabbling in more risk-laden activities to fail.
The Obama administration and Congress chose the alternate route in passing the Dodd-Frank financial regulation law. To Hoenig, they made a mistake.
"Following this financial crisis, Congress and the administration turned to the work of repair and reform," he said during a Monday speech in Washington. "Once again, the American public got the standard remedies -- more and increasingly complex regulation and supervision."
"The Dodd-Frank reforms have all been introduced before, but financial markets skirted them," he continued. "Supervisory authority existed, but it was used lightly because of political pressure and the misperceptions that free markets, with generous public support, could self-regulate."
Regulators will lack the will to wind down failing companies deemed systemically important financial institutions, or SIFIs, Hoenig said. The power to force large firms into liquidation was the centerpiece of the Obama administration's plan to reform the financial system in the wake of the crisis and Great Recession.
"I just can't imagine it working," Hoenig said. Speaking of the difficulty of forcing a large, complex firm like Citigroup or Goldman Sachs into bankruptcy-like proceedings, the Midwesterner admitted that if he were the one ultimately making the decision, "I would be inclined to bail them out."
"One of the difficulties in terms of supervision of these SIFIs is they are so horribly complex their directors don't understand it, their management don't understand it, and the supervisors certainly can't deal with all the issues," Hoenig said.
The second part of the administration's plan -- forcing large financial firms to hold more capital as a buffer against the kind of debilitating losses that led policy makers to bail them out -- also will inevitably come up short, as bankers will likely game the system once the economy rebounds.
An international consortium of bank regulators hammered out an agreement over the weekend that requires the world's biggest banks to hold extra capital beyond the requirements faced by their smaller international competitors. SIFIs would be required to hold up to 2.5 percentage points of extra capital as a proportion of their risk-weighted assets, for a total buffer of 9.5 percent.
"I don't have any faith in it at all," Hoenig said in response to a question at an event hosted by the Pew Financial Reform Project and New York University Stern School of Business. "It will be co-opted within three years of the recovery."
"The resistance ... is ferocious," Hoenig said of the banking industry's objections. "Once the economy turns around and these institutions are thought to be sound again, we will start to erode these capital requirements, just as we have in every instance in the past."
Bankers argue that increased capital requirements will impede lending, though academic research tends to refute that assertion. "It's almost propaganda," Hoenig said of bankers' reasons for objecting to tougher standards.
Proponents of the measure say bankers are simply objecting because the more capital firms are forced to hold, the lower their earnings will be in relation to their equity. U.S. bankers say they'll be at a disadvantage relative to their foreign counterparts. Hoenig called that assertion "nonsense."
Others argue that bankers are simply concerned about their bonuses, as shareholders will likely call for lower pay packages as a result of lower earnings.
SIFIs must be broken up and simplified, Hoenig said, not just to avoid the inevitable weakening of standards and reemergence of timid regulators, but also because they're un-American.
"I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism," Hoenig said. "They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril."
Hoenig, who became president of the Kansas City Fed in 1991, will step down this October due to the Fed's mandatory retirement policy
Neil Barofsky, the former special inspector general for TARP, is out with a new book, Bailout. In it he details how difficult it was for him to get his job done. Gretchen Morgenson has an overviewÂ of the book:
His story is illuminating, if deeply depressing. We tag along with Mr. Barofsky, a former federal prosecutor, as he walks into a political buzz saw as the special inspector general for TARP. Government officials, he says, eagerly served Wall Street interests at the publicâs expense, and regulators were captured by the very industry they were supposed to be regulating. He says he was warned about being too aggressive in his work, lest he jeopardize his future career.
And so Mr. Barofsky, who formerly prosecuted Colombian drug lords as an assistant United States attorney in New York City, is schooled in the ways of Washington. One telling vignette comes early on in his book, when he is advised by inspectors general in other agencies about how to do his job.
As Mr. Barofsky writes, he had assumed that his assignment to oversee TARP meant that he should be fiercely independent from the Treasury Department, and vigilant against waste, fraud and abuse. But after canvassing other inspector generals for guidance, he writes, he learned of different priorities: maintaining and possibly increasing budgets, appearing to be active â and not making enemies.
âThe common refrain went like this,â Mr. Barofsky writes. âThere are three different types of I.G.âs. You can be a lap dog, a watchdog or a junkyard dog.â A lap dog is seen as too timid, he was told. But being a junkyard dog was also ill-advised.
âWhat you want to be is a watchdog,â he continues. âThe agency should perceive you as a constructive but independent partner, helping to make things better for the agency, so everyone is better off.â He also learned, he says, that success as an inspector general meant that investigations come second. Donât second-guess the Treasury. Instead, âfocus on process.â
Thus the collision course was set between Mr. Barofsky and a crew of complacent, bank-friendly Treasury officials. He soon discovered that the departmentâs natural stance of marching in lock step with the banks meant that he had to question its policies and programs repeatedly to ensure that taxpayers werenât at risk for fraud and abuse.
âThe suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true,â Mr. Barofsky said in an interview last week. âIt really happened. These suspicions are valid.â
----- It's unlikely that Barofsky undersands the grave problems of moral hazard that TARP created. Or how far away TARP is from a free market solutions, but his book provides an important object lesson about what really goes on in Washington D.C. That is, in this glimpse, we see how posers pretend to be conducting investigations, and brickwalls exist for those who actually think they are going to be able to investigate and change things.
Remember when Congress applauded itself recently for creating insider trading laws for members of Congress. Well, they also built in a loophole.
CNN is reporting that House Majority Leader Eric Cantorâs office wrote a loophole into the House version of the Stop Trading on Congressional Knowledge Act (STOCK) by exempting Congress membersâ spouses and children from having to report stock market transactions.
The Senate version of the bill requires these transactions be reported within 45 days by both its members and their families. But a memo from the Office of Government Ethics, which oversees all federal executive branch employees, used the House version, telling them spouses and children were not subject to the rule.
The law, which bars members of Congress from trading stocks based on information they get for work purposes and requires them to register any stock transactions over $1,000 within 45 days, was signed into effect in April.