Another example of the regulatory revolving door comes from today's Wall Street Journal, in an article headlined, "What J.P. Morgan Knew About Madoff":
But on Tuesday, the bank's general counsel Stephen Cutler stood before a group of analysts and said J.P. Morgan "did not know about or in any way participate in the fraud" and vowed not to litigate the case in the media. Mr. Dimon then took the microphone and said: "You can imagine what I would say."
The Journal, alas, doesn't mention it, but this is the same Stephen Cutler who, until 2005, "was Director of the US Securities and Exchange Commission's Division of Enforcement. During his six-year tenure at the SEC, Mr. Cutler oversaw 1,100 employees and led the agency's investigations of numerous financial reporting matters, as well as its actions involving exchange specialists, research analysts and mutual funds."
If Mr. Cutler didn't figure out Mr. Madoff was a fraud while Mr. Cutler was at the SEC, how was Mr. Cutler supposed to figure out Mr. Madoff was a fraud while Mr. Cutler was at J.P. Morgan Chase? Nothing against Mr. Cutler, who by all accounts is a fine fellow, Phi Beta Kappa and summa cum laude from Yale and an editor of the Yale Law Journal. It's a complicated situation, and the Madoff victims and their lawyers have an interest in finding deep pockets from whom to recover. But one of the themes we've been hitting frequently around here is this concept of the revolving door between the regulators and the regulated, and this is a fine example.