In May, the Revolving Door Project and over 30 other organizations urged Senate Democrats to push for strong progressives for the leadership positions at key financial agencies allocated to Democrats.
In the not too distant past, Democrats appointed revolving-door figures to these agencies little different than Republican nominees.
Democrats now have a chance to demonstrate that they have become the party of the people by whom they choose for open leadership positions at the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC).
Following Trump’s surprise win fueled by calls to “drain the swamp” of Washington corruption, leading Democrats promulgated what they called a “Better Deal.”
That document states, “We must end the revolving-door in Washington and rein in the influence of high-powered Washington insiders, lobbyists and big-money donors — and the special interests that are driving Washington’s agenda.”
It’s time for Senate Minority Leader Chuck Schumer (D-N.Y.) to walk the walk and put people over revolving-door bankers for these important positions at the SEC and FDIC. Unlike in the recent past, when only a handful of public-interest-minded organizations or activists paid attention to financial regulators, activists expect the Democratic party to put forth aggressive regulators.
Sadly, Schumer has a history of appointing foxes to guard our financial hen houses. In 2005, Schumer’s machinations led Annette Nazareth to secure a Democratic SEC slot expected to go to James Cox, a Duke University law professor widely respected by reformers.
Nazareth spent 17 years working for Lehman Brothers, Salomon Smith Barney and the corporate law firm of Davis Polk before her jobs at the SEC.
In Nazareth’s time at the SEC, she was criticized for lax oversight of the banking industry, having “had responsibility for investment bank oversight” in the period leading up to the financial crisis.
In fact, while head of market regulation, Nazareth reassured the SEC that new rules allowing big investment banks like Goldman Sachs to take greater risks would not lead to disaster. Nazareth’s optimism was wholly unjustified.
Unsurprisingly, when Nazareth left the SEC after a decade at the SEC, she returned to representing financial institutions at Davis Polk, where she became a critic of what became the Consumer Financial Protection Bureau (CFPB).
Nazareth told a former colleague still working for the SEC that, “The prospect of a consumer finance protection agency made her ‘feel ill’ and that she’d asked SIFMA, the Wall Street trade group, to ‘trash’ a proposal for an investor advocacy office at the SEC.”
Nazareth is not the only Schumer-supported SEC Democratic designee with a revolving-door past who proved to be weak on Wall Street and a deep disappointment to progressives. Few people personify how the revolving door corrodes the federal government than Mary Jo White.
Predictably, during White’s 2013–17 stint as chair of the SEC, she “slowed the progress of high-profile rules governing executive pay, broker obligations, and swaps, the financial products that helped fuel the financial crisis,” according to Bloomberg Businessweek.
White’s utterly ineffectual regime gave rise to a flurry of significant negative attention on “beleaguered SEC Chair Mary Jo White,” ranging from wonky critiques delivered by letter from Sen. Elizabeth Warren (D-Mass.), to a mobile billboard funded by progressive CREDO Action activists.
An online petition generated 116,403 signatures in favor of the proposition that it was “time for Mary Jo White to go.” There were many calls for White to quit carrying Wall Street’s water during her ethically questionable stint at the SEC.
As David Dayen noted in February 2017, after a “tenure as chair of the Securities and Exchange Commission under President Obama [which] bitterly disappointed those who hoped she would aggressively enforce banking laws,” White returned to “the corporate defense team at Debevoise & Plimpton, marking her sixth trip through the revolving door between various government jobs and the white-collar defense law firm she calls home.”
Schumer should take note that critics of White’s tenure have won the day within the Democratic Party. As Politico has noted, the 2016 Democratic Party platform incorporated the critiques of Mary Jo White offered by Senators Sherrod Brown (D-Ohio) and Warren.
The Democrats’ 2017 Better Deal continued that momentum, decrying the corrosive impact of the revolving door on the executive branch. With a Democratic SEC nominee now overdue, we should be able to see sooner, rather than later, whether under Sen. Schumer, the Democrats “Better Deal” is actually a real deal.
Jeff Hauser is director of the Revolving Door Project, a project of the Center for Economic and Policy Research that advocates on behalf of progressive economic issues.