Mary Jo White is tough. Really, she is.
That’s the message that Chuck Schumer, the Democrat who represents New York (and Wall Street) in the Senate, tried to convey as he introduced White during her confirmation hearings before the Senate Banking Committee. White is President Barack Obama’s choice to head the Securities and Exchange Commission – the permanent replacement for the already-departed Mary Schapiro – and Schumer’s comments were directed as much, if not more, at his fellow Democrats as at his Republican adversaries. Because while White earned a rather fearsome reputation when it came to prosecuting mobsters and terrorists during her tenure as U.S. Attorney for the Southern District of New York, she went on to a second career representing Wall Street honchos like John Mack of Morgan Stanley and Ken Lewis of Bank of America.
Which kinda begs the question: Which is the real Mary Jo White? The ferocious pit bull of a prosecutor, or the Wall Street-friendly corporate lawyer of the last decade? My suspicion is that it’s going to come down to a leap of faith on the part of the Senate – and that White will benefit from this. Some will opt to believe in her as a prosecutor by instinct. Those who believe that Washington has already imposed too many constraints on Wall Street institutions can choose to view her as someone more sympathetic to the realities of life on the Street than all Schumer’s tough talk might suggest.
My own feeling is that we need someone who can combine both perspectives. White clearly has shown herself to be a tenacious and aggressive prosecutor; had her only interest been in building up her resume enough to get her any job at a corporate law firm, she wouldn’t have stuck it out as long as she did or risen to the level that she did. Many, many of her peers bolted far earlier than she did – or never made the decision to prosecute malefactors in the first place. After all, we’re talking about the woman who “got Gotti,” as in John Gotti, the “Teflon Don.” If you are willing and able to take on Gotti – widely believed to be responsible for the disappearance and likely murder of a neighbor who accidentally ran over Gotti’s son – then tackling even the likes of former Lehman Brothers CEO Richard “The Gorilla” Fuld and his heirs can’t be all that difficult.
Which brings us to the question of White’s willingness to do just that. While her headline-grabbing cases didn’t include all that many big Wall Street ones, she was far from oblivious to what was going on. I remember her speaking eloquently to a group of reporters at The Wall Street Journal back in the mid-1990s about financial crimes and misdemeanors; she clearly was informed, articulate and thoughtful on the subject. And while the 65-year-old White has been working for the “dark side” as a top corporate lawyer for Debevoise & Plimpton, heading the latter’s litigation department for the last decade, that’s only about a decade of her professional life.
There’s a lot of huffing and puffing about the “revolving door” between Wall Street and Washington. Frankly, Mary Jo White is not the kind of person that I worry about passing through it. I’m more concerned about younger regulators, those still trying to make a name for themselves who might be tempted to soft-pedal investigations for fear of making enemies that will make it difficult for them to find a more lucrative job on the other side of the courtroom in a few years’ time. White has earned her reputation and earned the big bucks. What she has left to consolidate is her reputation and her legacy. She doesn’t strike me as the kind of lawyer willing to squander either to be soft on Wall Street.
That doesn’t mean that White is going to make Wall Street’s toughest critics happy, either. Will her appointment – or the appointment of anyone else, for that matter – mean that Wall Street institutions and their CEOS and former CEOs find themselves in court, charged with civil or criminal offenses related to the financial crisis? Probably not.
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Part of the problem is the “too big to fail equals too big to jail” argument most recently voiced by Attorney General Eric Holder. Part of it is the complexity of the cases in question: Look at the burden of proof facing the Justice Department in its case against Standard & Poor’s for ratings the agency applied to the toxic mortgage securities that wreaked such havoc during the crisis. Courts remain divided on how to view the First Amendment defense – that these ratings merely constitute opinions – and it has been equally hard for regulators to bring compelling cases investment banks.
Mary Jo White offers the optimum combination of qualifications for the job right now. It’s not just, as Schumer said, that she is known to play a mean game of basketball despite her short stature, or that she likes motorbikes. It’s because she has prosecutorial instincts and a knowledge of the inner workings of Wall Street that can never be gleaned without working there in some way, and without which she’s likely to just spin her wheels. By now, she knows how Wall Street’s titans think, and that can only help the SEC in its efforts to devise effective regulations and make sure the institutions it tracks don’t undermine them. Moreover, her background means that she’ll be under scrutiny: Odds are that if she seems to be playing ball with the Street, it won’t be long before some SEC whistleblower lets the world know. That’s when it would be time to pile on top of her, not now, before she has proven that the “real” Mary Jo White is the corporate defense attorney and not the tenacious prosecutor.
What I’ll be looking for is more than just sound bites from Schumer or White herself, but action. Even then, the action doesn’t need to be looking back at the events of 2007 and 2008. Sure, if there are cases there that fall into the SEC’s purview (rather than the domain of the DoJ or other regulators), then I’d love to see White’s SEC pursue them. But coming up with effective new rules for money market funds will be one tricky task that might be more important going forward, and then there’s the pesky question of what actually constitutes proprietary trading, as opposed to simply market making.
Both issues will pit Wall Street against Main Street, in different ways – and others will probably emerge to test White’s commitment. But of all the candidates – those rumored to be interested and those who campaigned not-so-subtly for the nomination, White’s mixture of experience seem to me the best that we can hope for. Now if only those members of Congress who worry she’ll be too cozy with Wall Street could spend as much time pushing for a bigger enforcement budget for the SEC as they do grilling White. That would really be a big win.