"There's no revolving door … I won't ever be going back to government."
Those were the words former Securities and Exchange Commission chairman Mary Schapiro used in an interview with the Wall Street Journal to explain her move to Promontory Financial Group, formally announced on Tuesday.
The notion that Schapiro would not be traveling through a revolving door between the private and public sectors might strike some observers as a bit of a stretch. Prior to joining the SEC, Schapiro worked at the Financial Industry Regulatory Authority—a privately owned self-regulatory organization from which she departed worth several million dollars.
Now, after a high-profile stint in the public sector, Schapiro is expected to return to the private side of the fence. Or perhaps it would be more apt to say she'll be straddling the fence at Promontory, which American Banker described in a long profile last month as a "shadow regulator” and "bank doctor” packed with former public servants. As that piece put it:
"With close to 400 employees and some 1,400 consulting engagements under its belt, Promontory Financial Group has built a shadow network between banks and regulators. The firm is a sort of ex-regulator omnibus, capable of forecasting, mimicking and occasionally even substituting for the financial industry's supervisors.”
There's no question that a former official like Schapiro brings a world of practical experience—and connections—to an operation like Promontory's. But her move is also likely to add to public cynicism over the fact that so many high-profile people flit between the public sector, where they burnish their resumes, and the private sector, where they amass wealth the average American can only dream about. Freshly minted Treasury Secretary Jack Lew is but one recent example. The SEC has long been a great way station for such activities.
What could be wrong with such behavior? Beyond the cynicism it creates is the risk that regulators and the regulated get way too cozy. Former Federal Deposit Insurance Corp. chairwoman Sheila Bair said this about the influence large banks have over lawmakers:
"The capture, a lot of people say, is bipartisan. And when I say capture, I'm talking about cognitive capture. It's not so much about corruption. It's just listening too much to large financial institutions and the people who represent them and not enough to the people out on Main Street who want this fixed."
When it comes to listening to financial institutions, Mary Schapiro clearly has a world of experience.
Neil Weinberg is the editor in chief of American Banker. The views expressed are his own.