I’m honored to have heard from the Connecticut Press Club tonight that my Bloomberg View columns from 2012 won first prize in the Personal Opinion Category. You can read the winning columns here and here.
Articles
Are you a lowly Main Street investor? Well, nobody cares what you think about financial reform
It’s never a great time to be a lowly member of the investing public looking for protection from the sharks of finance. But today? Well, try to lower your expectations a tad more.
Deep-pocketed banks are dominating the process of writing the new financial rules mandated by the Dodd-Frank Act. It isn’t that there’s nobody advocating for small investors. It’s just that the few organizations that make a case for the public are outgunned by the well-funded financial industry.
“Despite a significant expansion in the number of foot soldiers out there working in the public interest on these financial issues, we are still completely overwhelmed by the industry lobbyists,” Dennis Kelleher, chief executive officer of Better Markets, told me.
I wrote about the lopsided battle to influence the new financial rules in my Bloomberg View column tonight. You can read it here.
Hate Follows When the Police Try to Do Their Job
This article originally appeared in Bloomberg View on March 7th, 2013.
It’s a lousier time than usual to be a lowly member of the investing public looking for protection from the sharks of finance.
Deep-pocketed banks are dominating the process of writing the new financial rules mandated by the Dodd-Frank Act, dwarfing the efforts of investor advocates looking to rein in the banks.
At the Securities and Exchange Commission, which is charged with protecting investors, lawbreakers can cut sweet deals for exemptions from punishments before the ink is dry on their settlement papers.
Efforts to help everyday investors, in the meantime, can wind up taking a back seat. Dodd-Frank, signed into law in July 2010, required the SEC to establish and staff an Office of the Investor Advocate. More than 2 1/2 years later, the project is stuck on the agency’s to-do list.
“There’s a basic resistance to seeing things from the investor point of view,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “It all goes back to the same thing — the degree to which the industry dominates this whole conversation.”
It’s a cultural problem as Roper sees it: Regulators and the regulated operate in a setting where people with the same pedigree move back and forth between government and private-sector jobs and outside views carry little weight. SEC spokesman Kevin Callahan said in an e-mail that investor protection is at the core of all the agency’s actions, and that until an investor advocate is appointed, existing SEC offices are performing the roles required by Dodd-Frank.
Old Acquaintance
A study released last month by the Project on Government Oversight, a nonprofit watchdog group, stirred up a discussion about the revolving door of lawyers who alternate between government and industry, where they defend banks and brokers. Sorting through documents filed by 419 SEC alumni who had recently left the agency, the Project found 2,000 cases in which alumni planned to represent a client or an employer before the SEC between 2001 and 2010.
That’s a lot of meetings among lawyers who used to work down the hall from one another, but who now — officially, anyway — are adversaries. In the view of SEC critics, it is part of the clubby state of affairs that pushes government watchdogs and banks to see things the same way. Callahan said that the U.S. Government Accountability Office studied the revolving-door issue and concluded that the SEC’s controls were as strong as those of other government agencies. What a relief.
The public’s concern that regulators “are on the same team or focused in the same way as the entities they are supposed to be regulating” is a valid one, New York University Law School professor Rachel Barkow said on a panel at the New York City Bar Association last month. If more of an effort were made to have representatives of consumers at agencies, “you might have a more proactive movement right now to break some of the big banks up,” she said.
For now, the banks throw their weight around. To get an idea of just how much access bankers get to regulators, consider the calculations that Duke University law professor Kimberly Krawiec and Duke lecturing fellow Guangya Liu recently completed. Krawiec and Liu tallied up all the meetings that the Treasury Department, the Commodity Futures Trading Commission, the SEC, the Federal Reserve and the Federal Deposit Insurance Corp. had with various constituencies between October 2011 and December 2012 to discuss the Volcker rule.
Industry Outguns
Public interest groups such as Americans for Financial Reform and Better Markets had 64 meetings with the regulators. The financial industry and its representatives: 551.
Those sit-down meetings “are where the real work is taking place,” Krawiec says. “And the meetings were almost completely dominated by financial firms, their trade groups and their law firms.”
Regulators aren’t turning away public-interest groups that ask for meetings. It’s just that the financial industry has such vast resources that it overpowers the conversation. “Despite a significant expansion in the number of foot soldiers out there working in the public interest on these financial issues, we are still completely overwhelmed by the industry lobbyists,” said Dennis Kelleher, chief executive officer of Better Markets.
It won’t make it any easier to push for reform if the stock market keeps hitting new highs, which inevitably will cause memories of the crisis to fade.
NYU’s Barkow suggested that regulators seek out people from different backgrounds to fill consumer-advocate positions that would carry clout in policy disputes.
There actually is a government agency that has gone out of its way to get diverse views. It is reviled by the banking industry and is under attack by politicians who want to diminish its independence and prevent it from carrying out its mandate. The Consumer Financial Protection Bureau has a consumer advisory board that includes 13 female and 12 male members, four of whom are Hispanic. They have backgrounds in public policy, housing, retirement advocacy and academia.
Compare that to the SEC’s investor advisory committee, which does include Roper and other investor-friendly members but also has two hedge-fund officials, a private-equity executive, a venture capital guy and a director from the Bush Institute, a public policy research group founded by former President George W. Bush and his wife, Laura. The board of governors at the Financial Industry Regulatory Authority relegates two of its “public” seats to retired securities industry officials.
You don’t hear any drums beating to shut Finra or to reduce the SEC’s independence. Show me a financial regulator with real independence and input from diverse voices, and I’ll show you a sitting duck for vicious attacks.
Don’t Skewer Sheryl Sandberg
There’s a lot of work to be done between here and equality for women. Rich women in good jobs have one set of problems and poor women have another. Women with children pile on a whole new set of challenges. And women most anywhere can tell you there’s still discrimination that needs to be fixed in the workplace.
So why do critics expect that Sheryl Sandberg, the chief operating officer at Facebook, would be able to solve every problem that women face in one book? I review Sandberg’s “Lean In: Women, Work and the Will To Lead” for Bloomberg Muse today. You can read it here.
Antilla columns get Commentary award
The Society of American Business Editors and Writers (SABEW) announced winners of its “Best in Business” journalism awards today. I’m honored to be on the list for my 2012 columns for Bloomberg View. You can see a list of all the winners here.
From the judges: “Susan Antilla’s sharp-edged commentaries give no quarter to those who mistreat investors or to the meek regulators who let offenders off easy. Her writing is crisp and eviscerating — two powerful traits when it comes to sharing opinions. Antilla demonstrates a shrewd understanding of the financial industry and its unsteady interaction with the federal government.”
Getting a little vertigo from the regulatory revolving door?
There’s been a lot of attention to the government-to-private practice “revolving door” since President Barack Obama nominated white-collar defense lawyer Mary Jo White to be chairman of the Securities and Exchange Commission.
Investor advocates say we should be worried when lawyers shuffle back and forth between jobs as regulators and lucrative spots defending banks and brokerage firms. But the lawyers who move in and out of government jobs say they can handle the conflicts just fine.
The New York City Bar Association had a panel to discuss “The Financial Crisis and the Regulatory Revolving Door” on Feb. 12 and moderator Scott Cohn of CNBC posed the question “Which is it?” Is it spinning out of control or is it non-existent?”
I was one of the six panelists, and cited a few gems from a just-released report by The Project on Government Oversight (POGO) that illustrated the close connection between the SEC and its alumni who’d moved on to represent the institutions the SEC regulates.
In an item about the panel on Feb. 19, POGO said “White’s nomination highlights the challenge that the SEC and many agencies face when senior officials have tangled ties to the industry they’re supposed to be regulating.” You can read the POGO post here.
I wrote about Mary Jo White’s conflicts in a recent column for Bloomberg View.
Your thoughts on the debate? Let me know at @antillaview or susan.antilla15@gmail.com.
Mary Jo White’s Past and the Future of the SEC
Have you been buying into the sales pitch for President Obama’s nominee for chair of the Securities and Exchange Commission?
Mary Jo White’s supporters say she was tough as U.S. attorney for the Southern District of New York, where she prosecuted mobsters and terrorists. From my column for Bloomberg View today:
She spent the past 10 years representing Wall Street, so she knows something about the legerdemain of banksters. And — insert violin solo here — she is a patriot, willing to give up millions of dollars in income as chairman of the litigation department at Debevoise & Plimpton LLP for a lousy government salary.”
Of course, the addition of “former SEC chairman” can only enhance her resume if and when she decides to go back to private practice. As for the idea that she might somehow be able to use her experience working for Wall Street to help crack cases as a regulator, I’m not buying it.
The SEC and Justice Department have had former defense lawyers checking in and out of top spots for years, and it hasn’t led to any big-bank carnage among the people who orchestrated flakey derivatives, self-destructing collateralized-debt obligations or other outrages. When was the last time you saw anyone from a well-known bank doing a perp walk for his role in the financial crisis?
You can read the full column here.
As always, I’m happy to hear from readers via Twitter or at susan.antilla15@gmail.com.
Mary Jo White’s Past and the Future of the SEC
This article originally appeared in Bloomberg View on February 8th, 2013.
The sales pitch for President Barack Obama’s nominee to run the Securities and Exchange Commission goes something like this:
Mary Jo White was a tough U.S. attorney for the Southern District of New York who prosecuted mobsters and terrorists. She spent the past 10 years representing Wall Street, so she knows something about the legerdemain of banksters. And — insert violin solo here — she is a patriot, willing to give up millions of dollars in income as chairman of the litigation department at Debevoise & Plimpton LLP for a lousy government salary. (Although, with a little luck, she will make up for that once she adds “former SEC chairman” to her resume.)
The arguments in support of White are as old and tired as the government-to-private-practice hustle that they endorse.
Her supporters say she has the integrity to shift from Wall Street defender to champion of securities laws. But it’s hard to take seriously the notion that White will help crack complicated cases with her inside knowledge of how the bad guys work, an argument that often gets thrown around when Wall Street lawyers are tapped to be regulators. “People from the private sector know where the bodies are buried,” former SEC Chairman Mary Schapiro told the Washington Post after White’s nomination last month.
Top Spots
Maybe so, but the SEC and Justice Department have had former defense lawyers checking in and out of top spots for years, and it hasn’t led to any big-bank carnage among the people who orchestrated flakey derivatives, self-destructing collateralized-debt obligations or other outrages. When was the last time you saw anyone from a well-known bank doing a perp walk for his role in the financial crisis?
The Web pages of the best-known law firms give an idea of who the real winners are in the revolving door. Debevoise says it’s “the only law firm to have former U.S. and U.K. attorneys general as well as a Queen’s Counsel.” Cleary Gottlieb Stein & Hamilton LLP tallies 10 former federal prosecutors and three former SEC general counsels. At Covington & Burling LLP, they boast of having “convinced the SEC not to pursue an enforcement action” against one client, and that partner Bruce Baird, a former assistant U.S. attorney, persuaded regulators “not to proceed with cases on a significant number of occasions.”
It isn’t often we get an inside look at how onetime regulators work their disappearing-case magic, but a celebrated example that wound up under a microscope involved none other than White. When Morgan Stanley was considering hiring John Mack to be its chief executive officer in 2005, the securities firm’s board was concerned about an SEC investigation into possible insider trading involving Mack and Arthur Samberg, the former manager of the hedge fund Pequot Capital Management Inc.
The board retained White, who called SEC Enforcement Director Linda Thomsen on June 27, 2005, to get intelligence on Mack’s legal exposure. Three days later, White told Morgan Stanley’s board that she had seen “no evidence of any involvement by Mr. Mack in insider trading or other wrongdoing.”
Thomsen had let on to White that there was “smoke but not fire” in e-mails between Mack and Samberg, and privately worried that it could be disruptive to markets if Mack became CEO and then wound up as an SEC target. “It could have ripple effects that makes the markets go haywire,” Thomsen told a Senate committee — an overblown fear if ever there was one.
Wrongful Firing
Mack was never accused of wrongdoing. Gary Aguirre, an SEC lawyer who had been pushing to question Mack, was fired a few months after White’s call. He later won $775,000 from the SEC in a wrongful dismissal suit.
White declined to comment, said Debevoise spokeswoman Gabriella Schoff.
A revamp at the SEC that included improved policies for handling complaints and tips was supposed to boost morale. Yet the SEC’s ranking in an annual employee survey of “Best Places to Work in the Federal Government” has dropped steadily since 2007, with the SEC placing 19th of 22 midsized federal agencies last year. SEC workers’ view of the leadership of the most senior staff was worst among the categories they were asked about.
That makes sense considering some of the private conversations that became public about their bosses. The SEC’s own general counsel (now at Cleary Gottlieb), David Becker, e-mailed former SEC Commissioner Annette Nazareth in 2009 after she had left for Davis Polk & Wardwell LLP and referred to “the inanity” of the idea of having an investor advocate at the agency, according to a Bloomberg News article last year.
It would be nice if White turned out to have what it takes to pump up morale and turn the SEC into a place where inspired investor advocates get the top jobs, but there are reasons to be doubtful. White is worried about being too hard on corporate criminals. She told the newsletter Corporate Crime Reporter in 2005 that prosecutors considering criminal charges should be “very concerned about the impact on the innocent employees or shareholders.”
White won’t play a direct role in prosecuting companies at the SEC, of course. But given her views on indictments, it’s hard to imagine she will encourage her staff to refer cases against companies to criminal authorities.
It’s also a worry that she knows too much about the career perils of being aggressive as a regulator. In talking about one of Debevoise’s hires from the SEC, she testified in a 2007 deposition that she needed to check whether the candidate had been so tough as a regulator that it would hurt his ability “to function well in the private sector.” Commitment to the job and mission is a good thing in government, she said, or at least it is “to a point.”
If we’re lucky, White, 65, will decide that a do-gooder legacy is more important than the next multimillion-dollar job.