The Securities and Exchange Commission has come a long way from its first chairman, Joseph Kennedy, to its potential latest, Mary Jo White.
If you review the resume of the two appointees, you might think it is a straightforward contrast between an industry insider and a tough prosecutor. Yet, things are never so simple and critics have already started to come forward with an alternative view of White's career arc that emphasizes her movement between criminal prosecution and criminal defense.
Such critics appear to suggest that: First, White is somehow conflicted because of loyalty to Debevoise & Plimpton, the corporate law firm she worked for and the Wall Street executives she represented, including Morgan Stanley's John Mack and former Bank of America CEO Kenneth Lewis, while there. Second, they argue her experience as U.S. Attorney for the Southern District of New York may not be relevant to the SEC, because much of her time there was spent prosecuting terrorists and mobsters. Third, critics posit that the big issues the SEC has to deal with are not on the enforcement side, but on the regulatory side. This includes, for example, dealing with high frequency trading and transparency issues in our public markets, an area many note White does not have much experience in.
These criticisms have little merit and there are several reasons to think that White will be a successful pick for this important role. One has to understand both where White comes from and the commonalities between different types of criminal enforcement to understand why.
First, the rigor of the legal training at a top law school and the work ethic at a firm like Debevoise & Plimpton are not easily navigated. There are very few women who have made it to the highest echelons of such litigation firms and even less so at the time that White did. The selection process and training at top law schools and top law firms generally succeed in bringing to the fore only the most unrelenting and nuanced legal minds.
To be candid, this is not a life for those who think or talk about work-life balance. In terms of understanding the law and how to leverage it for either a defensive or prosecutorial posture, such training is critical, and is something White brings to the table that her predecessors do not. It has been much commented on that when Sheik Omar Abdel Rahman and nine fellow Muslim militants were charged in a 1993 plot to bomb the United Nations and other New York landmarks, the Manhattan U.S. attorney's office, headed by White, found an obscure seditious conspiracy statute from the Civil War era to prosecute the case.
Such litigation skills and single-minded, dogged focus will be highly useful to White in pursuing the mandate that President Obama has presented her with.
Second, White's determination to succeed and legal competence are far too ingrained to be diluted by a more recently acquired set of countervailing biases. Let's set aside the fact that such biases are very much a fiction: White's loyalty is first and foremost to the law, not to persons on either side of it.
For the sake of argument, let's say White did possess a bias toward corporate America; it is nonetheless naïve to suggest this would lead to a go-easy approach. It may sound brutal and a cliché but it is true: People like White want to win and will always do what it takes to do so. Winning in this case will mean turning the SEC into a tough organization that commands respect, even fear, on Wall Street. Having a detailed knowledge of the tactics and strategy of the defense team will only help White prepare for her upcoming battles.
Third, for anyone who has been following the spate of insider cases most recently prosecuted by the Justice Department, it is clear that the most successful prosecutors of insider traders are those who have adopted the tactics of prosecutors of their more dangerous cousins: drug dealers, mobsters and terrorists. The most noted example of this has been the extensive use of wire taps by the Justice Department in investigating insider trading cases.
As such, White's prosecutorial experience is likely to help fulfill the SEC's enforcement mandate. The fact that she has such strong relationships with the key players at the Justice Department and in the industry will strengthen her hand further.
Fourth, White's background in prosecuting terrorists and mobsters will be a real asset in the important fight to bring money laundering under better control. Most of the critical attention from pundits has involved the SEC's failures regarding Bernie Madoff and Allen Stanford, its penchant for no fault settlements and ongoing difficulties regulating markets and new technology. But the SEC's oversight of anti-laundering efforts is also a very significant role from a societal perspective. Experts estimate that billions of dollars flow through regulated financial networks from illicit sources every year and thousands suffer as a result of the guns and drugs this money buys. White's ability to make headway in this area – to ensure the financial services industry plays its part in cutting off the money supply to drugs and terrorism – may be her most outstanding contribution.
Andrew Waxman writes and consults on risk issues in capital markets. He has worked at some of the leading investment banks and consulting firms in Wall Street and the City of London. He can be reached by email at firstname.lastname@example.org or on Twitter: @abwaxman.