A long, long time ago we had dinner with a prominent federal appeals court judge who was known to be a proponent of the idea that regulatory agencies tend to be controlled by the very interests they are meant to regulate. To show how smart we are, we explained how this kind of regulatory capture happens—the standard public choice stuff about how industry has an immense and concentrated interest in the operations of the agency, while the broader public it is supposed to protect has only a slight, passing, and disparate interest and is largely too ignorant to follow the debate.
“Wrong!” the judge told us. Describing the agencies as “captured” he said implies that they were ever independent, when in fact the entire process of agency control by special interests operates right from the start. “Agencies are not captured, they are created at the behest of special interests and operated to meet the goals of those interests,” he said.
Since then, we’ve tried to tamper our cynicism about agencies but to little avail. Because things like this keep happening: yesterday JPMorgan Chase hired Stephen Cutler, the former head of enforcement at the SEC, to be it’s top legal counsel.
And of course, this is hardly the first time an SEC hotshot has landed in a Wall Street sweet spot:
The appointment makes Cutler the third former SEC enforcement chief on Wall Street, following a path cleared by former government regulators, including Deutsche Bank AG General Counsel Richard Walker and Gary Lynch, the top lawyer at Morgan Stanley. Cutler will succeed Joan Guggenheimer, who was among the closest advisers to JPMorgan Chief Executive Officer Jamie Dimon before she died of cancer in July at age 54.