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April 3, 2013

Mary Schapiro and Lanny Breuer Give Us the Ultimate Dog-Bites-Man Story

As head of the Securities and Exchange Commission for the past four years, Mary Schapiro failed to win a major civil action against any Wall Street executive connected to what may be the worst financial fraud in history, the subprime-mortgage scam that led to the 2008 crash. As head of the Justice Department’s criminal division for the past four years, Lanny Breuer failed to accomplish the same with criminal action. And now both are headed back over to the other side: deep-pocketed firms that earn their keep largely from Wall Street. In Schapiro’s case, that’s Promontory Financial Group, which advises financial firms on regulation; in Breuer’s, it’s Covington & Burling, a major law firm that defends financial clients.

If this sounds like a dog-bites-man story, it is. Actually it’s more like, Wall Street bites everybody. But that too is pretty predictable these days. “It used to be called ‘selling out,’ ‘cashing in,’ or ‘influence peddling.’ Now it’s referred to politely as the ‘revolving door,’ ” said Dennis Kelleher, president of Better Markets, a Washington nonprofit that advocates for better regulation of financial markets. “But whatever it’s called, nothing is more corrosive to the American people’s trust in government than when former senior public officials turn their so-called public service into multimillion-dollar riches unimaginable to almost all Americans.”

Schapiro will no doubt be welcomed back to her tribal homeland with open arms. During her rather undistinguished tenure, SEC failed to gain any significant prosecutions related to the subprime disaster, though she did manage bolster SEC’s enforcement process and create a new tips database and a whistleblower office. At one point, SEC was even rebuked by U.S. District Court Judge Jed Rakoff, who refused to approve the agency’s $285 million settlement with Citigroup because, as in another case with Goldman Sachs, SEC failed to gain any admission of wrongdoing.”

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Read full National Journal article here

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