Lehman Anniversary Reminds Us Change Needed at SEC

The collapse of Lehman Brothers seven years ago today was the signature moment in a financial crash brought on by recklessness, greed, and outright fraud. Every year since, the anniversary of the Lehman collapse has offered us the opportunity to ask whether we have learned this lesson.

In the case of Securities and Exchange Commission (SEC) Chair Mary Jo White, the answer is clearly, “no.” Today, Mary Jo White represents a pre-Lehman mentality of deference to Wall Street – and it is long past time for her to go.

In an era when we need strong regulators reining in corrupt and out-of-control companies, White’s SEC is most famous for its dysfunction and for granting “get out of jail free” waivers to criminal banks.

The Project on Government Oversight (POGO), a respected government watchdog group, recently sent a letter to President Obama requesting that he ask Mary Jo White to step down as chair of the SEC, and designate a new head of the agency. As POGO put it, “White’s views have often aligned with those of her former Wall Street clients.” Sen. Elizabeth Warren penned White a scathing letter expressing deep disappointment and accusing the SEC chair of deliberately misleading her in a meeting.

The revolving door between Wall Street and government has once again produced a regulator who serves the interests of financial institutions, not everyday Americans.

The Securities and Exchange Commission under White’s leadership has settled the majority of its cases without requiring companies to admit guilt. Her track record better resembles the Mary Jo White who encouraged prosecutors to “moderate” their enforcement actions than the Mary Jo White who in her confirmation hearings promised to secure admissions of guilt.

The SEC has also become broken and dysfunctional, with White’s office known as “the cheese cellar: It’s where policy goes to age.” White’s history as a Wall Street defense attorney, and her husband’s current job as a corporate lawyer, has led to a frequent need to recuse herself from scores of cases. With only five voting commissioners, her multiple recusals result in gridlock and lighter punishments for corporate wrongdoing.

White’s whole-hearted embrace of the revolving door includes multiple former bank executives working as high-level SEC officials. She recently hired the former general counsel of Goldman Sachs, Andrew “Buddy” Donohue, for the influential role of her chief of staff.

Perhaps most gallingly, White’s SEC has routinely and automatically granted waivers to allow corporations that have admitted to criminal violations to keep their “trusted” status as issuers of securities and guardians of investments. She has frequently quarrelled with Commissioner Kara Stein, who objects to these “get out of jail free” waivers, and reportedly pushed President Obama to nominate a new SEC commissioner who might “dilute” Stein’s influence.

Mary Jo White may not have learned from the financial crash. But we have. That is why more than 116,000 CREDO members have called on President Obama to replace Mary Jo White, and nearly 100,000 have called on the president to replace retiring commissioner Luis Aguilar with someone like Kara Stein. It is why hundreds have called the White House and the SEC demanding change.

It is also why, this week, a mobile billboard is shuttling back and forth between the headquarters of the Securities and Exchange Commission and the White House with a clear, unequivocal message: It is time for Mary Jo White to go.

Seven years after Lehman Brothers, Americans have not forgotten, nor completely recovered. If President Obama wants to show that he has learned the lesson of that crash, then he has no choice. He must ask Mary Jo White to step down – and nominate a tough reformer in her place.