Stanford Exposes Rodgin Cohen’s Myth of the Myth of Regulatory Capture

By William K. Black
Quito: March 19, 2015

Sometimes the fates conspire to bring together two stories that when considered together bring that lightbulb moment.  The first story, dated March 18, 2015, is from the Wall Street Journal.  It overwhelmingly conveys the opinion of Rodgin Cohen, the super-lawyer to the super-fraudulent bank CEOs.  He was a leader of the financial regulation wrecking crew that produced the criminogenic environments that drove our recurrent, intensifying financial crises.  As I will explain in a future column, Cohen basically has one speech, which he has repeated with minor variants for decades.  The latest Cohen variant claims that:

“[T]he regulatory environment today is the most tension-filled, confrontational and skeptical of any time in my professional career.

Cohen says the strained relations between government regulators and bank officials stems from ‘the myth of regulatory capture.’

‘The consequences of such as approach are likely to be less effective examinations, not more,’ he said. ‘Unless we deal with the canard of regulatory capture, we will inevitably be placing pressure on examiners to disprove this charge.’”

The second story is from “Yves Smith,” who created and runs the blog NakedCapitalism.  It is actually two stories at this point.  Her first article on March 17, 2015 explained how Andrew Bowden, a senior SEC official, had displayed a classic case of regulatory capture at a March 5, 2015 conference at Stanford.  Stanford Law School posted the video of the conference showing Bowden as a literal cheerleader for the Private Equity business he is supposed to regulate.  I wrote to point out as a former financial regulator why I would have immediately asked for the resignation of any of my staff that even remotely came close to Bowden’s disgraceful and dishonest behavior.

Cohen’s claim that regulatory capture was a “myth” and a “canard” was demolished the day before the column quoting his views ran in the WSJ.  But Stanford has now further refuted Cohen’s views by trying to make the evidence of obvious regulatory capture disappear.  Stanford has removed the public’s ability to view the video of Bowden in his figurative pom-poms and short skirt.

The video is also embarrassing to the Stanford professor who ran the conference and failed to disclose his conflict of interest and to the other SEC officials in attendance who failed to stop or even criticize Bowden’s obsequious cheerleader routine.  The conference was held by Stanford “in coordination” with the SEC.  The keynote speaker was SEC Commissioner Kara Stein, who did not repudiate Bowden’s disgraceful actions.

“Yves Smith,” fortunately, attracts readers who are “skeptical” of the financial industry, including Stanford professors who are on the board of directors of major financial firms yet feel no need to disclose that fact at such conferences.  “Yves Smith’s” updated column explain why this skepticism led a reader to copy the video when Stanford Law School initially made it public.  Stanford’s efforts to “disappear” the incriminating video failed because of this skepticism.

Stanford supports Cohen’s effort to rewrite history by writing regulatory capture out of history.  But Stanford’s video exposed that it is Cohen who is the myth-maker.  Remember Cohen’s use of the word “canard.”  The origins of that word in old French were the word for “duck” and “quack.”  Bowden walks like a cheerleader, looks like a cheerleader, and quacks like a cheerleader – he is a cheerleader.

Cohen’s myth-making fails for another reason.  He is desperate to achieve for his clients, who led the most destructive financial frauds in history, a return to the days when regulators were not “skeptical” of the bankers’ claims that they were “doing God’s work” and who were unwilling to “confront” his clients’ criminal actions.  His goal, in sum, is a return to total regulatory capture.

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