A trial attorney from the Securities and Exchange Commission said his bosses were too “tentative and fearful” to bring many Wall Street leaders to heel after the 2008 credit crisis, echoing the regulator’s outside critics.
James Kidney, who joined the SEC in 1986 and retired this month, offered the critique in a speech at his goodbye party. His remarks hit home with many in the crowd of SEC lawyers and alumni thanks to a part of his resume not publicly known: He had campaigned internally to bring charges against more executives in the agency’s 2010 case against Goldman Sachs Group Inc.
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.”
His March 27 remarks drew applause from the crowd of about 70 people, according to witnesses. In an interview, Kidney said he hadn’t heard any blowback from SEC officials.
SEC spokesman John Nester declined to comment.
‘Afflicting’ Power
Kidney, 66, has worked at the agency since 1986 except for a four-year stint at Aetna Inc. At the SEC he won a half-dozen insider-trading trials. His speech bemoaned the lack of SEC enforcers who “believe in afflicting the comfortable and powerful.”
The SEC has taken a beating from critics including lawmakers, judges and advocacy groups who say the agency has been too easy on the banks that helped fuel the 2008 crisis by peddling mortgage-backed securities of questionable value to unwary investors. No senior executive at a major financial firm has gone to jail and the SEC has brought civil charges against only a handful.
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.