Why the Banks Should Fear Mary Jo White

This morning big banks woke up scared witless at the news of Obama's pick to head the SEC, Mary Jo White.

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Alex Wong / Getty Images

President Barack Obama listens as Mary Jo White, his nominee to be the next chair of the Securities and Exchange Commission deliver remarks during a ceremony at the White House in Washington, D.C., on Jan. 24, 2013.

In the binary world of wing-nut commentators, everything is personal. What matters most to ideologues is individuals taking absolute positions in a battle of good versus evil: you’re either with us or you’re against us, and professional association is moral allegiance, regardless of the circumstances.

So it’s not surprising to see the left up in arms over the nomination of former Manhattan U.S. Attorney Mary Jo White by President Barack Obama to head the SEC. White had a long and widely-praised career as a public prosecutor and then went to private practice. There she represented big banks and, among others, Time Warner, the parent company of Time Magazine, in a suit brought by Donald Trump that was eventually dismissed.

To summarize the case against White: because she represented financial titans including Morgan Stanley and Bank of America, she’s morally tainted, sympathetic to the plight of big banks, and inevitably inclined to lean in their favor.

In the real world, where politics, economics and the law are much bigger than any one player, those same big banks should be scared witless this morning at the prospect of having Mary Jo White as a top enforcer.

First, she has a reputation as one of the toughest prosecutors in the country. Lightweights don’t run the U.S. Attorney’s office for the Southern District of New York, and during her nine years in charge her list of busts was prodigious.

Second, her ethical reputation is unchallenged, despite the sudden urge to damn her by association. “Mary Jo has an impeccable reputation for integrity and professionalism,” says William Burck, who worked for her in the Manhattan U.S. attorney’s office and is now co-managing partner of the DC office of the firm Quinn Emanuel Urquhart & Sullivan.

Most important, she’s seen the banks naked.

As the top lawyer for Bank of America in a fraud litigation brought by then-New York Attorney General Andrew Cuomo, she came to know everything about their books, their vulnerabilities and where and whether they crossed the line “Her time representing big banks should be viewed as an asset, not a liability,” says Burck. “She knows more about what is effective and ineffective regulation than just about anybody.”

Play the scenario out. An SEC investigator finds potential impropriety at a bank and opens an investigation. Even if White is recused because of specific representation of the bank, are the targets of the investigation more or less likely to cover their tracks or come clean knowing White is running the place and knowing that she has seen not just the banks’ general strategy for outmaneuvering regulators, but the details of how they do it?

Sure, the revolving door can lead to regulatory capture. But the mismatch between private industry and government in skills, knowledge and capacity is much more likely to produce that problem. Hiring someone who has seen the ugliest of the big banks is a smart choice.

57 comments
AdamRussell
AdamRussell

Would she have a conflict because of attorney-client privilege based on what she already knows from representing them?  I mean if she brought prosecution and the bank was to claim that evidence she wants to present was obtained while she worked for them would that information get excluded from evidence?

funonline
funonline

Regulators killed banks and bankers not the other way around. Regulators and the FDIC are the nefarious criminals. Conditioning the public to think otherwise is part of the crime. Go to the fdic.gov/failed bank list. I worked inside the system for 40 years..Ms. White knows both sides, we will see what she is made out of. 

AndyClark
AndyClark

Parked it with local FBI, sworn, in person with detail.  Once while employed, again augmented after employment.  How many low level workers you know with the balls to walk into FBI with the goods?  See how much good it does you...you are still DEAD MEAT, that is why I have to sue them for millions... i was in profession for 30 years, last 2 at WF, i earned about $200k per year, they killed me in all the courts, they even hit me in "family Court".  HEAR POLICE IN MY HOUSE asking if I have GUNS?  3w, com:  RisePatriot

AndyClark
AndyClark

Sorry, the picture I use happens to be the CEO of the big bank.  I want to be clear:  pre-parked evidence of sales system fraud that rolls up to their India operations and their connection at that time with HSBC via the tax-haven island Mauritius where the insurance operation was based. I used google to figure it out via the resumes and equipment used by WF India Solutions.  There is a Chinese company called Shanghai Commercial...I rolled that in too.  Funny?  Only thing I am sure of is the sales system fraud.  All the rest?  The proved when they used SWAT to kidnap me.  Serious.  They figured they could bury me in Eugene Oregon.  Regular format for website in your URL: RisePatriot

AndyClark
AndyClark

I worked at the lowest level at a giant bank.  I reported sales system fraud (and more) internally by the book and finally was compelled by mandatory reporting provisions of the SAFE Act, Dodd-Frank, and SOX.  I was fired, not a big deal.  The bank used local police to kidnap me from my home at night on made up charges.  The Police a/v and reports are all posted, it takes about 30 minutes to realize I was kidnapped to terrorize, for real, and to discredit the FBI filing.  It is beyond the Swartz case.  See what the lady will do with it hopefully, in court now.  Case of Century. my site is the regular web format in your URL:  RisePatriot   no ads first hand real  i pay to have it certified and I fully identify


jsyoon
jsyoon

Sure, one of the major perks for representing big companies and banks is to see each one of them naked... although I would say she would have to take caution to avoid a series of prosecutions from her past employers if she is considering to use her "inside info" to achieve something close to Sarbanes-Oxley.

austin87j
austin87j

Another baseless story reassuring people that corrupt bankers are eventually going to pay for screwing us all over.  Everyone feels better, and then we all forget THAT BANKERS NEVER PAY FOR THEIR CRIMES! 

PhilLoubere
PhilLoubere

Yes, the "wing nut" is likely Taibbi. This is his article: 

http://www.rollingstone.com/politics/blogs/taibblog/choice-of-mary-jo-white-to-head-sec-puts-fox-in-charge-of-hen-house-20130125

Seems to me Matt Taibbi is the voice of reason, and his facts a lot more solid and well researched than this boot-lick piece by Calabresi.  To all the outraged defenders of Wall Street here, please explain the firing of Aguirre in the investigation of John Mack, and White's role in it. Indeed, the fox is in charge of the hen house, and the hens are us.  

jmac
jmac

In the world of "wing nut commentators" from Rolling Stones (yes, Rolling Stones), Calabresi doesn't mention the "wing nut commentators" that control the Wall Street Journal.  THAT'S why we have a problem.  The Wall Street Journal is an enormous entity that controls the US and the markets.  The Rolling Stones - not so much.   

The WSJ:   "President Obama is counting on his regulators to achieve by fiat what he can't get through a Republican House of Representatives, and on that score his appointment Thursday of Mary Jo White and Richard Cordrary aren't reassuring."   -  As they worry she wasn't "tough enough on Teamsters."

Calabresi is as much a problem as the WSJ as he HAS to mention that "wing nut'  Democrats are worried she won't be tough enough after the debacle that we call the Justice Department passed the buck.   The WSJ's editorial page is as bad as Fox. Can the press not figure that out as it hits Democratic "wing nuts".  

fitty_three
fitty_three

[alternative 1000 words]

<snarl> "One step closer and I'll chaw that arm off!"</snarl>

KentR
KentR

Don't forget  she would have to consider her past employment  and recurs her self from a lot of the prosecution of her past employers due to  inside knowledge from her  time as  defense council  for lots of  the people that helped to cause the last big money scandal  of Banks vs SEC 

j45ashton
j45ashton

While Obama wins because of his policies & his record, what took Republicans completely off-guard were his abilities to strategize & calculate effects.  While the recovery was most fragile, he had Mary Schapiro on the case on the SEC side & Lanny Breuer on the Justice side.  Both pretty benign.  Lanny Breuer just resigned (after fairly bruising reports on Frontline & CNBC 60 Minutes) and Mary Jo White, prosecutor extraordinaire, will head up the SEC.  The statute of limitations hasn't run out yet.  Let the criminal cases proceed.  Many civil cases have already run their course & the markets didn't blink.  With record profits being reported, real estate on the mend & unemployment slowly but steadily declining, Wall St won't care 2 pins if several icons wind up going to jail.  While the SEC is at it, I hope it also takes a good hard look at senior management compensation and the relationship with consulting firms and corporate boards of directors....to see if the interests of shareholders are always fairly represented in these doings or if what we really have are self-serving, clubby relationships that just rob corporations blind. 

BobJan
BobJan

She reminds me of the "principal" from the movie "Kindergarten Cop".

gysgt213
gysgt213

“She knows more about what is effective and ineffective regulation than just about anybody.”


If you care about regulating the banks this statement should concern you.  Because it does not mean what we all think it should mean. 

JohnRomano
JohnRomano

lol, The banks know all the right politicians to pay off, they will be alright.


www.ids-Anon.tk

GregMorrison
GregMorrison

Some good points are raised in this article, but one needn't be an ideologue with a black & white point of view to be somewhat concerned.  It would be similar to a lawyer who'd spent years working for Monsanto being appointed to the FDA, and there are some very practical, legitimate issues regarding impartiality and old loyalties (let alone the possibility- however remote- that they could still be in the pocket of their old employers).  If being a life-long fan of a particular team can raise a red flag concerning possible bias in a football referee, then it seems reasonable that similar concerns might surface regarding someone in a position of far greater consequence.


Perhaps Ms. White has "seen the banks naked", and such insight could serve her very well in her new role, but such an appointment does place a premium on the candidate's integrity.  We can only hope now that she's up to the task.

antonmarq
antonmarq

Why are people still using banks for their business and not credit unions is the next Sphinx mystery. banks charge too much and offer very little. They rip off the people any which way they can, and they have little dignity to admit that they are, overall, crooks. 

TheDisclosure
TheDisclosure

She'll help these big corporations, not hinder them. A clever scheme by a pack of ruthless corrupters. 

sacredh
sacredh

"Most important, she’s seen the banks naked."

.

Once you've been seen naked, the bragging or excuses are basically meanigless. She knows what's there. What I got from the article is that she does the best she can do for her employer. The SEC would be her employer now.

Sue_N
Sue_N

I'll believe it when I see CEOs and Wall Street execs being led away in chains.

shepherdwong
shepherdwong

What is it that makes you Beltway hacks reveal your establishment sycophancy right out of the box with silly hyperbole? This is "up in arms":

"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?"

Some damned good questions from someone who's been doing actual journalism (jealous much?) about the psychopathic, greed-headed plutocrats who destroyed the lives of millions and have been nothing but handsomely rewarded for it. The same sort of questions, by the way, that were asked about TimGeithner who, as predicted, did absolutely nothing to punish these shameless criminals. I would like to say that I'll await your apology  to "the left" and Taibbi when White predictably does nothing (or is prevented from doing anything) to the banks, but I really hope by then you have a job more suited to your talents. I hear that Home Depot has knee pads on sale.

jmac
jmac

The left is up in arms?   Wonder what the Wall Street Journal is going to say in an editorial about Ms. White?   Can we read about the "wing-nut commentators" that are the WSJ?  Will they embrace the woman who the NY Times on it's front page today says is going after Wall Street?  The woman who might put some umph in DoddFrank?  

I'd love to read a column about the wing nuts at the Wall Street Journal.   Surely they trump some obscure wing nuttery on line?  

gysgt213
gysgt213

I guess since its been 4 years Mary Jo White will be checking a lot of SOL dates in order to let these banks off.

Robbert5
Robbert5

This appointment is already in danger after this mornings federal appeals court ruling that recess appointments are only constitutional when Congress is in recess where recess is defined as the period in between the outgoing Congress and incoming Congress after elections.  At least that is what I got from Andrea Mitchell.  Governing is becoming rapidly impossible if this keeps going on.

gysgt213
gysgt213

Its not that she represented banks as a private lawyer.  Its that she will protect the banks in her role as a public regulator. If you research her past you will see that its more likely than not that she will protect the banks interest.  After all that will be her bread & butter when she leaves government.

MrObvious
MrObvious

This admin had the chance to strike fear into the banking industry with such gross criminal acts like laundering money for drug cartels but that ended up with a slap on the wrist. But in our failed war on drugs regular folks are thrown into jail for minor drug related charges with lifelong consequences.

I very much doubt that banks will fear this admin for any reasons given that the now even bigger to fail financial institution can basically pay for their blooded hands with cash. 

Sure, I'd love to see a change here but there's no indication that we're actually going to get it. The banksters rule; free and legal.

deconstructiva
deconstructiva

I'm still waiting for perp walks for bank / trading firm CEO's that wrecked our economy. Maybe MJW will help get this done.

forgottenlord
forgottenlord

On the one hand, we have Joe Kennedy Sr who made a boatload of money leading into 1929 and then pushed regulation that would stop people like him from making money that way.  On the other hand, we have a huge list of people with similar qualifications that have allowed banks to become too big to fail and protect them so they don't destroy the US.

It's a very dangerous line.

I'm far more inclined to give her the benefit of the doubt, though.  She's a lawyer, not a banker, and so I'm more inclined to believe she's blind to the moral positions of who she defends and who she prosecutes than I would be a banker who I'm generally inclined to assume puts profit above all else.

AfGuy
AfGuy

Timothy Geitner had seen the banks naked... from the inside.... and look how well THAT worked out.

One might say she would be uniquely qualified in that regard... to tell the banks how better to hide the bodies.... or where to apply the lipstick for ultimum effect.

But, prospects of increased oversight and prosecution of the financial industry head for overt wrong-doing?  That WAS a joke, wasn't it, given the policy over the past four years by Holder of holding NO ONE of consequence accountable?

Her primary role will to continue to run interfence, a la Julius.

jmac
jmac

@TheDisclosure If Wall Street thinks she going to help them, we'll read all about it in the Wall Street Journal editorial.  The odds are they're not going to be happy.  Fox Business News was taking a very careful worried look.  Since Justice is not going to do anything, let's see if the SEC can flex some muscle - all we have to do is worry about  "a pack of ruthless corrupters"  - the Republicans.  Just watch Fox.  Listen to Kudlow.   Then we'll know how scary she is or isn't.  

DonQuixotic
DonQuixotic

@deconstructiva 

The wealthy and largess are hardly ever appropriately punished for their crimes, much like with celebrities.

forgottenlord
forgottenlord

@AfGuy 

I'm not sure anyone could be held accountable.  Making loans to people you probably know can't afford them is perfectly legal - just stupid.  Selling the entirety of the loan with full documentation of the credit information and financial information of the person is perfectly legal.  Taking those loans and turning them into bonds was perfectly legal.  A third party taking a package of them and selling a Credit Default Swap on BBB rated bonds - perfectly legal.  Taking a bunch of the BBB rated Credit Default swaps and composing them into a CDO bond - perfectly legal.  Sending that to the ratings agency with documentation saying what kind of bonds they were - perfectly legal.  Ratings agencies not realizing that said CDO bonds were actually 100% BBB rated bonds bundled together and thus treating it as a normal bond and giving 80% of it a AAA rating - perfectly legal, though stupid and negligent (not that they're legally required to rate things intelligently - and they were given enough information that, using the same information, other investors had figured out they were really BBB rated material).  Investors and banks assuming that the AAA rated bonds were actually carrying AAA level of risk, perfectly legal.  Not realizing that you basically just got screwed by some other department of your own corporation - perfectly legal.  And most importantly: the entire system being full of idiots who don't have a clue what they're doing - stupidity has never been a crime.

The real question is: why on Earth did we ever think that the CEO's had a clue what they were doing and why didn't we fire them?

And there is growing evidence that there is no skill to the people who were doing the trading and getting their bonuses - all that garbage about "you need the bonuses to get the best people".  You figure it out, they weren't the best people.  They just made money.

But absolutely none of that was criminal.  We can't charge people for being stupid nor can we charge a system for being stupid. The best we can do is discredit and regulate it.  Say what you will about Frank-Dodd, at least it was trying to do that (and while it doesn't fix Wall Street, it does mean that the next time they blow themselves up, they won't take the rest of the economy with them.  The most important thing Frank-Dodd did was it forced banks to hold onto a piece of anything they sell giving them incentive not to make the dumbest loans imaginable.

forgottenlord
forgottenlord

@Robbert5 

And Appeals Court judge would've had to make the ruling it did.  It didn't have the power to declare the pro-forma sessions to not really be sessions - only the Supreme Court has that kind of power.  This was a ruling that was going to come down and Obama knew it was going to come down when he made it.  The real question is: will the Supreme Court rule that the prevention of recess appointments by Congress prevents the executive branch from doing its job and therefore can't use this pro-forma tactic for preventing recess appointments?

It'll be interesting to see if the new filibuster rules will help.  Soon, the issue may become moot.

Hanah
Hanah

@forgottenlord @AfGuy You clearly do not understand the bank manipulations 2008 that brought the world financial system to its knees.

jmac
jmac

@forgottenlord @AfGuy It was fraud, pure and simple and someone had the top could have been held accountable.  The Justice Department dropped the ball.  ("it might cause a trickle-down effect" on the markets).  We know it was fraud because the people checking up on the loans were told repeatedly not to use the word "fraud" in their reports - if they did, they were canned.  It's going to happen again because all they banks had to do was shell out some money and the only ones who went to jail were small fry.   Maybe the SEC will make up for what Justice ignored.   

shepherdwong
shepherdwong

@forgottenlord  Nonsense. There was fraud from top to bottom, from those who were writing what they knew were mortgages based on bogus documentation, to selling mortgages by banks that didn't actually hold proper title, to those who misrepresented the value of supposed AAA CDOs full of high-risk mortgages to those who traded on inside information, which is what the Taibbi article referenced above is about. There was also plenty that should have been illegal that was being invented faster than government could legislate (as if). If banker had stuck to what banks should have been doping - lending, instead of inventing, trading and betting on and against crazy derivatives - and doing due diligence, we'd be in a much better place.

forgottenlord
forgottenlord

@Robbert5 

Actually, another possibility that would be interesting is if the Supreme Court required a vote on any candidates put forth by the President prior to the end of its next session - or something along those lines

forgottenlord
forgottenlord

@Hanah

I've explained what CDO's are.  I've explained how everything pieced together.  I've explained how it wasn't fraud.  Thus far, I've been told or it has been implied that I'm gullible and do not understand what I'm talking about but aside from "people said it looked like fraud" and "the prosecutors didn't really try" - both of which, while true, *do not demonstrate fraud*.  Only one side of this debate is bringing actual facts that demonstrate fraud that actually caused the crash.  So explain to me how I'm the one who "clearly did not understand the bank manipulations" - I understand them - I've written them up several times on this thread.  The problem is, that doesn't make it fraud!  So explain to me where my argument falls apart.  I'm sick of being told I'm wrong, I'm an idiot, or I'm gullible when not one person has actually demonstrated that my argument is wrong.

forgottenlord
forgottenlord

@jmac

Again I ask: is it fraud to make a loan that you know the person couldn't possibly repay while simultaneously giving sufficient information to the person - the same information you have that convinces you that this person couldn't pay - who's willing to buy it or to the ratings agency who's going to rate it?

Yes, you had some cases where banks were betting against the same things they were shorting, but nearly all of that was in the final days and none of that was the reason for the financial crash.  That all happened when the banks finally figured out "wait a second, we're screwed" which as near as I can tell wasn't until about January/February of '08.  The vast majority of CDO's, however, everything was above board - the information was given to the relevant parties, the criteria that the ratings agencies had were being met, the banks were just looking for bigger and bigger loopholes at the ratings agencies to send more and more questionable mortgages through.  But it was still all visible to anyone who actually checked the information.

jmac
jmac

@forgottenlord @AfGuy Not only could they not use the word fraud - at some point going through the mass of ridiculous loans they started laughing and making fun of just how ridiculous it was for an unemployed school teacher to be buying a $600,000 home.  Ha ha - said the banks.   No problem.  We'll just bundle these suckers, sell them and then BET AGAINST THEM.  Ha ha.  All the way to the bank.  

forgottenlord
forgottenlord

@shepherdwong

Here's another way to put it: how does a bank nearly lose everything on something they know is bad?

forgottenlord
forgottenlord

@shepherdwong @Paul,nnto 

Actually, I'm deriving my own conclusions from various pieces of facts I've been picking up from various sources - center piece being The Big Short by Michael Lewis.  Assuming the answer to my question above is that such a situation is not fraud, then you need absolutely no fraud whatsoever to account for something like 90% of the losses (yes, that number is being pulled out of my a**)

shepherdwong
shepherdwong

@Paul,nnto I did. How anyone could have been reading Taibbi, Krugman and watching similar coverage of what happened and conclude that this was anything other than a criminal conspiracy and multi-layered fraud is simply buying the nonsense being peddled industry flaks, some of whom are the government employees who are supposed to be regulation and prosecuting them.

http://www.cbsnews.com/video/watch/?id=6369592n 

forgottenlord
forgottenlord

@shepherdwong 

I guess my fundamental question is this: is it fraud to make a loan that you know the person couldn't possibly repay while simultaneously giving sufficient information to the person - the same information you have that convinces you that this person couldn't pay - who's willing to buy it or to the ratings agency who's going to rate it?

forgottenlord
forgottenlord

@shepherdwong

If you read about the guys who were buying Credit Default Swaps, they say that they could find all the documentation - that it was all there.  They could see quite clearly what was in the loans, what was in the CDOs, etc, etc, etc.  They could see it was all garbage.  It was painful and the feeling was that absolutely no one including the originators had actually looked at it, but it was all there.  How is it fraud if you're giving only true facts?

The AAA CDOs were not misrepresented.  The documentation was all there, anyone could actually comb through it.  You could tell where the loans were from, you could tell what the incomes were, you could tell whether there was documentation with it, you could tell everything you needed to figure out how stupid the loan was.  All this documentation was given to the ratings agencies and the ratings agencies were given a truthful accounting of exactly what was in the package - the only thing they weren't told because they never asked was that large parts of these packages had already been rated by the ratings agencies as BBB.

Yes, the fact they were inventing was bad and yes that's the reason we're in this mess, but trying to end invention is conceptually ridiculous in a capitalist society.  Nor is it fraud to invent

Paul,nnto
Paul,nnto

@shepherdwong @forgottenlord Did you see the Frontline story I linked to? There were no criminal charges because our government chose not to charge them, or rather, the person making the decision was afraid to lose.

Disgusting. 

forgottenlord
forgottenlord

@Paul,nnto

Interesting watch.  My question about fraud below still stands because if the answer to that is no, then aside from a few things mentioned late in the program (shorting stuff you were buying, etc - I forgot about that) would be the only things prosecutable - but they didn't cause the crash.  The crash was still caused by BBB loans being re-rated as AAA because the ratings agencies weren't figuring out that they were looking at BBB loans even though that information was fully available to them.  This in turn let the Wall Street banks pick up absolute garbage for loans which in turn gave places like Country Wide the ability to make the garbage loans in the first place - and as I was saying earlier, if it is not fraud to make the loan but to be forthright about what the status is of the person you gave the loan to, then neither the originators or the Wall Street banks committed fraud in creating the bubble.