Roger Lowenstein, a director of the Sequoia Fund–the flagship fund of Ruane, Cuniff & Goldfarb–wants to explain how regulation works to Elizabeth Warren, who he describes as “the nation’s unelected regulatory czar” and someone who–dear, oh dear–paints “bankers with as broad a brush as Donald J. Trump uses to demean Muslims.” He does so in an Op-Ed that is destined to be used as a prime example of mansplaining at its worst.
Lowenstein kicks things off by providing an example of Warren’s inability to understand regulation:
Ms. Warren’s latest provocation was to send a letter to President Obama this month demanding the removal of Mary Jo White, chairwoman of the Securities and Exchange Commission. Ms. White, she said, had demonstrated her unsuitability for the role by failing to have the S.E.C. draft rules requiring corporations to disclose details of their political spending.
Last time I checked, the S.E.C. was a regulatory agency of the executive branch, in which Ms. Warren is not, in fact, employed. President Obama was quick to retort that Ms. White was right for the position. You could imagine him protesting, sotto voce, “Hey, firing agency heads is my job.”
Lowenstein should stick to investment banking for he seems not to understand how politics or democracy works. (Indeed, I suspect he does not understand how the English language works because he does not seem to know the meanings of those words.) I could write a letter to President Obama ‘demanding’ the removal of the chair of the SEC if I wanted. (Perhaps I could write an Op-Ed in the New York Times that lays out my argument.) Perhaps I could make a case for the chair’s incompetence; perhaps I could make note of a gross violation of professional ethics that had come to my attention. The President could take my advice into consideration if he so wanted; or perhaps he could hit ‘delete’ on my email. Firing administrative agency heads remains his job; my job as a concerned citizen–which is what I presume Elizabeth Warren is, in addition to being a US Senator–is to let him know my opinion on matters of interest to me. Elizabeth Warren cannot fire agency heads; if she sought to do so, then she’d be overstepping her legislative function. Does Lowenstein imagine that US Senators or state representatives never make their opinions known on matters of national interest to the President? They know very well that executive authority rests with the President. In the example above, does Lowenstein imagine that Warren is saying “I’m going to go ahead and fire Mary Jo White?”
Lowenstein suggests that there is no “good evidence” that “her pointed criticism of John G. Stumpf, the chief executive of Wells Fargo, during his appearance in September before the Senate Banking Committee, was responsible for his resignation this month.” Well, if by “good” you mean we have no admission from Stumpf that he was resigning because of Warrne’s tongue-lashing of him, then he is correct. But we are reasonable folks, and we infer to the best explanation. After Wells Fargo’s disaster, there was no move from Stumpf to resign; but after his public dressing-down by Warren went viral on social media he did so. Public shaming works; it causes many to fall on their swords. That knowledge of human psychology plus the conjunction of the two events–the shaming and the resignation–offers us reasonably good evidence that Warren’s criticism did cause Stumpf to resign.
Lowenstein accuses Warren of another “power grab” in her objecting to “President Obama’s nomination of Antonio Weiss for the job of under secretary for domestic finance”:
Mr. Weiss’s ostensible failing was to have been employed at an investment bank, Lazard. Ms. Warren…protested that the president should “loosen the hold that Wall Street banks have over economic policy making.” That demand ignores the obvious fact that bankers know something about economic policy, and that many of the best financial regulators, from Joseph P. Kennedy Sr. in the 1930s through Arthur Levitt Jr. and Henry M. Paulson Jr. in more recent decades, have come from Wall Street.
Notice the italics above–they are meant to provide a contrast to Warren’s ostensible ignorance of economic policy. But I agree with Lowenstein here. Bankers do know something about economic policy; they know how to make it work for banks and their CEOs. As for the “best financial regulators” coming “from Wall Street,” well, I suppose having foxes in the chicken coop is one way to keep the chickens safe. As the 2008 financial disaster showed us all so well.
Lowenstein goes on to claim that:
Confronted with Ms. Warren’s opposition, President Obama did an end run. Mr. Weiss withdrew from contention for the post and instead became an adviser to the secretary of the Treasury, Jacob J. Lew. What sort of nefarious deeds has Mr. Weiss perpetrated in that role? Well, he recently brokered a highly praised law to restructure Puerto Rico’s debt.
Ironically, in the very link that Lowenstein provides it is noted that the “highly-praised law” he makes note of was also criticized for “the anti-democratic nature of the oversight board, the relatively arcane restructuring process and a provision that could lower the minimum wage for young workers.”
Returning to Warren’s letter to President Obama, Lowenstein writes:
Ms. Warren wrote that by not developing a political spending disclosure rule Ms. White was “ignoring the S.E.C.’s core mission of investor protection.” Actually, dredging up the details of political spending has nothing to do with protecting investors, though it might fall into the category of “things corporations do that some people do not like.”
Wrong and right. Transparency about political spending does protect investors who have a right to know how their invested funds are being spent; and yes, being opaque about the details of your political contributions is something that “some people” do not like. Joint stock companies have a fiduciary duty to their investors because:
The ability of corporate executives to spend company resources for political purposes without shareholders’ knowledge raises significant investor protection and corporate governance concerns. Without transparency or disclosure, executives are free to spend funds invested by shareholders without accountability or monitoring.
Lowenstein’s Op-Ed reeks of butt-hurt and it is not a pleasant aroma. He should rest content with the billions he makes and the many he immiserates; and leave the regulation to folks who know how it–and politics and democracy–works.
Samir Chopra 