We were hoping that the Senate Banking Committee would give Mary Jo White, President Obama's choice to be chairman of the Securities and Exchange Commission, a tough grilling at today's confirmation hearing. What we got most often instead looked more like a friendly backyard grill party.
She is “a diehard Yankees fan” who “likes to crack open a cold Bud,” gushed Sen. Charles Schumer, D-N.Y., at the start of the hearing. It was a moment of frivolity that could have been forgiven if the committee's Democrats had done more than just played a friendly game of softball and if the Republicans had thought to use the opportunity to do something other than their usual government-regulation bashing.
As Robert Borosage noted in his post Monday, the committee owed the public serious scrutiny of White's record. As Borosage wrote:
She and her husband, John White, are pristine examples about how to cash in on the revolving door between government service and private practice. After serving as a public prosecutor, White made millions defending top Wall Street banks and major companies at Debevoise and Plimpton. Recent clients included JPMorgan Chase on cases arising form the financial crisis, News Corporation over its phone hacking, former Bank of America CEO Ken Lewis on the shady parts of the bank’s takeover of Merrill Lynch. Not surprisingly, Jamie Dimon, the head of JP Morgan Chase, has hailed her as the “perfect choice” to head the SEC. Exactly the kind of endorsement that should rouse the hackles of the citizens and senators alike.
Instead, committee chairman Tim Johnson, D-S.D., cited Dimon's endorsement as proof of White's "impressive" credentials. That was not an auspicious start.
Throughout the hearing, White offered answers that were both obligatory and seemed calculated to avoid making Wall Street nervous. New York Times reporter Peter Eavis concluded, "So far, it is almost impossible to use any of Ms. White’s testimony to gauge what sort of commission chairwoman she would be. She tells senators what they want to hear, yet at the same time hewing to what one would expect to be the S.E.C.’s official line. Her exchanges on money market funds — an issue that the fund industry is lobbying hard on — show this. This, of course, may make it easier for her to get confirmed. But she has said very little that would give hope to the camp that wants a tougher, more active commission."
On the topic of too-big-to-jail, for example, Sen. Robert Menendez, D-N.J., asked White if the big Wall Street financial institutions are “in essence protected from prosecution merely by their size.” White responded no and that the SEC does not take into account the size of institutions, and none are too big to charge. But she added that while the SEC has the power to charge, it does not have the Justice Department's powers to prosecute.
It was Sen. Sherrod Brown, D-Ohio, in one of the few times when White was put under tough, skeptical questioning, who asked White if she took advice from former Treasury secretaries Robert Rubin (who went on to be a top Citigroup executive) and Lawrence Summers (who went on to be a hedge-fund manager) about indicting financial institutions, and if the results hurt the economy. White hesitated, and then responded that she had in fact, but still believed that the SEC doesn’t consider collateral consequences when pursuing action.
Brown prompted further, asking White if she thought that in 2008 was it right bail out such financial firms with taxpayer dollars. White then changed her view, saying that systemic effects on the economy should be taken into consideration and prosecutors should think about “what is in the public’s best interest.” Brown then asked about accountability to the American public and the revolving door: What have you done in the past decade that will make ordinary investors feel they can trust you and that you have their best interest in heart?
Her answer was that in her past work representing Wall Street firms she was ethically bound to represent those firms' best interests. But as SEC chair "the American people will be my client and I will work zealously" on their behalf.
Sen. Elizabeth Warren, D-Mass., was the other Democrat on the committee who took an aggressive tone in questioning White. But her critique was wider than White and the SEC. Also at the confirmation hearing was Richard Cordray, who is up for confirmation as director of the Consumer Financial Protection Agency. Because Republicans have filibustered his appointment for the past year in an effort to dismember the agency, he is in the post in an interim basis as a result of a recess appointment by President Obama.
When weighing how to regulate the financial sector, Warren asked, “What about the cost of underenforcing the rules?” Warren demanded to know what the benefits of “letting big financial institutions wreck our economy” and where the rules are “to protect the counties and towns that were cheated.”
Good questions, but from White, there was not a strong answer that would have given the public confidence that the next time Wall Street engages in massive fraud and threatens to bring down the economy, White will stare down the financial bullies and make it clear that it is they, not the rest of the economy, that will pay for their misbehavior.
Watchdog or lap dog? We deserved a more conclusive answer with regard to one of the Obama administration's most important appointees.
Derek Pugh and Ben Johnson contributed to this post.