In news that is not surprising to anyone with a firing neuron in their brain, a report by the Project on Government Oversight (POGO) finds that the incestuous nature of the SEC-Wall Street relationship caused reform efforts in the money market fund industry to fail.
Former U.S. Securities and Exchange Commission staffers who now work in the private sector may have helped derail last year’s effort to reform the $2.6 trillion money market fund industry, according to a report released on Monday.
“The revolving door is deeply embedded at the SEC and throughout the federal government,” the report said.
“The close linkage between the regulators and the regulated can influence the culture, the values and the mindset of the agency – not to mention its regulatory and enforcement policies.”
No kidding. And look who makes a star appearance in the report – our new protector of the public interest and SEC head nominee.
POGO’s report also discusses Mary Jo White as an example of the revolving door.
It notes that White was previously hired by the Morgan Stanley board to determine whether its prospective chief executive, John Mack, had any exposure in an SEC insider-trading investigation of the hedge fund Pequot Capital Management.
In a 2007 investigative report by the minority staff of the Senate Finance Committee that looked into the firing of an SEC lawyer involved in the Pequot case, Senate staff questioned why White was directly contacting the SEC’s enforcement director at the time, Linda Thomsen, about John Mack.
If nothing else perhaps reports such as these can put to bed the Joe Kennedy myth that was conjured up initially for Gary Gensler and now being positioned for Mary Jo White. The myth goes something like this – we want ultra-insiders to run these agencies because they know where all the bodies are buried and therefore will be the most effective in reining in the bad practices of the industries they are set to regulate.
This logic sometimes bares out such as when companies hire former hackers to be their security consultants or casinos hire cheaters to watch the tables – but in those situations there is an incentive for the previously bad actors to do good. With insiders regulating Wall Street they know where the bodies are buried because they buried them and rather than honest converts they are at best temporary allies ready to trade in their badge for a black mask.
Photo by Susan NYC under Creative Commons license