Janine Wedel - Unaccountable - How Elite Power Brokers Corrupt Our Finances, Freedom, and Security

Performing for the Public?

Consider one seemingly ready-made narrative that flourished after the selection of Mary Jo White in early 2013 to chair the U.S. Securities and Exchange Commission. In naming White, the Obama White House appeared to be blasting one very loud message—“we are getting tough on Wall Street.” The descriptions usually affixed to the former U.S. prosecutor in New York are ones like these: relentless, hard-charging, gutsy. One New York Times editorial praised her record as “formidable” and lauded her “toughness, tenacity and aggressiveness.” 44

Who better to clean up Wall Street than the fearless dynamo barely five feet tall who pursued terrorists and mobster John Gotti? What she lacks in height, the narrative goes, she makes up for with chutzpah. When the SEC in November 2013 secured a guilty plea in the insider trading case against hedge fund giant SAC Capital, one of White’s predecessors, Arthur Levitt, Jr., called her a “rock star” in an interview with Bloomberg News : 45

This is real theater. This is David vs. Goliath. Little Mary Jo White takes on great big Stevie Cohen and not just for a day or a week or a month, but for years and her tenacity, her toughness has delivered what a great SEC chairman should deliver. It’s an admission of guilt at long last that she has brought to the SEC, and it hasn’t had that in 30 years.

On closer inspection, though, the fearsome “Little Mary Jo” narrative muddles somewhat, and we are fortunate that a handful of reporters still go beyond the simulacra. For one, when White joined the SEC, it was mostly her prosecutorial prowess that was trumpeted, with clips of the press conferences announcing indictments of people such as Omar Abdel-Rahman, the “Blind Sheikh.” But there was little mention of her private-sector work—white-collar criminal defense and, yes, SEC cases at a law firm long favored by Wall Street, Debevoise & Plimpton—that netted her millions over several decades. 46(The firm represented the insurance colossus AIG and “too big to fail” banks and investment firms, including Goldman Sachs. Her team helped former Bank of America CEO Kenneth Lewis and was hired by Morgan Stanley’s board to help chairman John Mack. 47)

Defenders like former SEC chairman Levitt say that, since her appointment, she has proven that she can zealously prosecute and extract once-unheard-of admissions of guilt from several bad actors. Columbia University journalism professor and New Yorker staff writer Nicholas Lemann notes the effect White’s efforts have been having: “During this run of cases, the S.E.C. was on the front pages almost every day. The news reinforced the perception that, under White, the S.E.C. had grown fangs.” 48

But, Lemann cautions, what if the fangs are needed elsewhere? He, for one, thinks that they are, notably in the fight over the nitty-gritty of the Dodd-Frank financial-reform legislation passed in 2010. 49He explains:

Enforcement is onstage, regulation is backstage. [L]ittle-noticed changes in laws and regulations were far more important in causing the 2008 crash than was law-breaking by the heads of the financial industry. The . . . industry is intensely engaged in trying to shape these [Dodd-Frank] rules, while the rest of the country has lost interest. The economy is in better shape. Prosecution is retrospective, and narratively riveting. Regulation is prospective, and boring and technical. It’s entirely possible for the government to become a tougher prosecutor and a more lax regulator at the same time.

The Nation agrees with this assessment, zeroing in on the “. . . stealthy work of battalions of regulatory lawyers”: 50

[A] kind of ground war has been going on for almost three years, with the regulators waging hand-to-hand combat to defend every clause and comma in Dodd-Frank, and the lawyers fighting to insert any loophole they can to protect their clients’ extraordinary profits. . . . And if a regulator ever succeeds in publishing a rule . . . then brace yourself for . . . “Defcon 4”: the bankers take the regulator to court, hiring the likes of Eugene Scalia [son of the Supreme Court Justice], who has carved out a lucrative niche blocking such rules on technicalities. . . . Three years after Dodd-Frank was passed, only 148 of the 398 rules requiring action by regulators have been finalized, and draft versions have yet to be submitted for half of the remainder.

Thus, White’s performances serve to distract us from the important but less-“sexy” issue of regulation by providing a sense of progress on the financial-reform front. Sidetracked by appearances, we risk missing the fight over all-important rules changes.

Brain Drain and Strain

Puncturing the kind of narrative bubble that surround Mary Jo White and financial regulation more broadly is the crucial task of holding the powerful accountable. But there are fewer and fewer reporters to do the job.

The decline in investigative reporting in particular (not just in journalism overall) is harder to parse, in part because, as the American Journalism Review points out, plenty of investigative journalism happens within a particular beat. 51For instance, the Boston Globe ’s Bryan Bender is primarily a national security journalist, and yet he did an extensive investigation on retired generals and the influence they continue to brandish and profit from in their very active post-military careers. If he lost his job, would he be officially counted as a loss for investigative journalism? Perhaps not, but he should be. And there are many others like him. 52

This brain drain has a pernicious effect on the public good, for reasons both obvious and more subtle. It’s easy to see that the simple loss of manpower means that fewer reporters will be granted the extensive time needed for connecting the dots, sorting through the agendas of power brokers, and finding connections among them.

There’s also the increasing strain on reporters who are now expected to “perform” across social-media platforms to generate more and more pageviews and eyeballs. As a result, according to a 2010 Pew report, journalists are “. . . focusing more time on disseminating information and somewhat less on gathering it, making news people more reactive and less proactive.” 53

Some journalists are plainly spread thin across these platforms. Others have created their own quasi-independent power centers. Some journalists and many opinion writers have established such large and engaged followings that they seem at this point almost like adjunct news outlets to the bigger mothership; it’s hard to fathom that Nicholas Kristof, New York Times columnist, would lose much of his 600,000-strong Facebook readership were he to depart from the Times . This certainly has accountability implications. Journalists know they need to have a heavy social-media presence; when they get that presence, they have both their own power and that of the old-media institution that pays their salary. But if a journalist acts on behalf of some unknown interest while on social media, that old-media institution can always distance itself by insisting that it never has complete control of what journalists say on Twitter or Facebook.

By 2013, Pew’s annual report was far more stark, describing how a “continued erosion of news reporting resources converged with growing opportunities for those in politics, government agencies, companies and others to take their messages directly to the public.” 54Some of their examples: 55

The government of Malaysia was recently discovered to have bankrolled propaganda that appeared in several major U.S. outlets under columnists’ bylines. A number of news organizations, including The Associated Press, recently carried a fake press release about Google that came from a PR distribution site that promises clients it will reach “top media outlets.” And recently, journalist David Cay Johnston, in writing about a pitch from one corporate marketer that included a “vacation reward” for running his stories, remarked, “Journalists get lots of pitches like this these days, which is partly a reflection of how the number of journalists has shriveled while the number of publicists has grown.”