Surprisingly this lawyer isn’t named “Captain Obvious.”
He’s James Kidney, an SEC Enforcement lawyer who joined the agency in 1986 and served there ever since with a four-year detour to work at Aetna. At his well-attended (about 70 people) retirement party, he fulfilled the dream of every retiring employee and called out the B.S. he’d witnessed in his years on the job. And at the SEC, that B.S. dealt mostly with a revolving door culture of fearful superiors more interested in harassing low-level offenders while turning a blind eye to anyone with responsibility on Wall Street.
This must have been an awesome party.
What else did he say?
There’s no video of this speech, but the quotes that have surfaced are thrilling enough.
The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, according to a copy of his remarks obtained by Bloomberg News. “On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening.”
Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.”
The revolving door culture of regulators is a cliché. And like most clichés, it’s totally accurate.
“I have had bosses, and bosses of my bosses, whose names we all know, who made little secret that they were here to punch their ticket,” Kidney said. “They mouthed serious regard for the mission of the commission, but their actions were tentative and fearful in many instances.”
Kidney went on to say the SEC has little interest in “afflicting the comfortable and powerful.” No kidding. Here’s how committed the SEC is to the comfort of Wall Street bigwigs: in a laughably symbolic gesture, they moved their office to neighbor Union Station so Wall Street senior executives barely have to step off the Acela to have their soft-ball interviews.
Now don’t get me wrong, the SEC does come down hard on some people. Just the wrong people:
In his speech, Kidney also hit the agency for using misleading statistics to showcase its enforcement efforts. The SEC should focus on the quality of its actions, rather than try to file as many as possible just to tout its record to lawmakers and the media, he said.
“It is a cancer,” Kidney said of the agency’s use of numbers. “It should be changed.”
There’s a signaling advantage to statistics like these. They can tell Wall Street that the SEC is serious. But if the statistics are founded on harassing low-level targets instead of making a serious effort to pursue financial crime, they come across as the empty lip service they are. Sadly, it’s empty lip service that can financially ruin folks at the bottom of the totem pole.
Happy retirement, James Kidney! You went out with a blaze of glory. Hopefully some of your superiors will take your speech to heart.
SEC Goldman Lawyer Says Agency Too Timid on Wall Street Misdeeds [Bloomberg Businessweek]