“I’m basically merits driven,” Mary Jo White, chair of the Securities and Exchange Commission, told Time in an interview earlier this month. “I’m literally an independent. Apolitical. So that I am not always going to be with the left’s perceived interests or the right’s perceived interests. It’s going to be what I think the right answer is.”
White, who has been in office about a year, made this statement in response to a comment the interviewer made about “the left.” It turns out that many Democrats are upset with White because of her proposal to review the way companies disclose financial information, a procedure that the SEC oversees. More generally, Democrats perceive White as ”overly solicitous to concerns of commissioners on the right,” according to Time, and are concerned that she may be “institutionally aligned with prior administrations.”
Specifically, former SEC Chair Elisse Walter, a Democrat who served as chair between December 2012 and April 2013. The interviewer recounts that Walter was hounded by Democrats like Sen. Elizabeth Warren (D-Mass.) for not taking big banks involved in the financial crisis to trial (see video below for the famous exchange).
To many liberals, Walter’s inaction was anathema to the idea that those responsible for the financial crisis should be held accountable. And to Wall Street watchdogs like Warren, accountability means more than just financial settlements. It means trials and, in any instance of intentional fraud, it means criminal prosecution.
In effect, watchdogs like Warren and some others in the Democratic Party have criticized White for not having sharp enough regulatory teeth. White, though, doesn’t see it that way. About the hearing with Warren, White told Time: “I think what she was saying was, are they too big to try in court? The answer is they’re not too big to try. If you get everything you ask for in a settlement that the law allows you to have and they agree to it, there’s not going to be a trial. There is a premium that companies of all kinds place on putting the matter behind them. So that’s going to translate into not very many trials because they’re going to give us as the government all the relief we are seeking in a settlement.”
It’s easy to imagine what this looks like from White’s position. A former prosecutor and investigator with a background in psychology and a long résumé dense with wins against terrorists, not to mention financial fraudsters, White understands very clearly what she is up against. For the 10 years preceding her appointment to the SEC, White served as chair of the litigation department at Debevoise & Plimpton, a world-class law firm specializing in corporate and financial litigation. She knows how to win against big banks, but it’s clear that her definition of a “win” is different from Warren’s definition.
From Warren’s position, this difference appears to be grievous. She seems to prescribe to a view of the crisis outlined by Judge Jed Rakoff of the Southern District of New York. Writing in the January 9 edition of The New York Review of Books, Rakoff said: “The stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word ‘fraud’ no fewer than 157 times in describing what led to the crisis, concluding that there was a ‘systemic breakdown,’ not just in accountability, but also in ethical behavior.”
Where fraud is concerned, a settlement isn’t enough for people like Warren. For people like White, the reasonable way to interface with big banks is through settlements. Each official sits toward a separate end of the spectrum.
In his piece for The New York Review of Books, Rakoff asks the question, “Why have no high-level executives been prosecuted in relation to the financial crisis?” The answer, according to him, boils down to a sort of institutional complacency among U.S. financial regulators, which was born out of an era of deregulation. White, the criticism contends, participates in this complacency.
But for whatever criticism there is, White was quick to take action once she assumed office. She’s launched investigations into contentious issues like high-frequency trading, toughened enforcement mechanisms, and broke a political stalemate impeding new regulation on admissions of guilt.