When people say there is a revolving door between the Securities Exchange Commission and Wall Street, they don't usually intend it as a compliment.
Dan Gallagher, one of two conservative SEC commissioners, said Thursday a revolving door does in fact exist—and it benefits the government.
"People should be thrilled about a revolving door where people with expertise come in and out of the government," Gallagher said. "It's good for the private sector. It's good for the government."
Gallagher, who will soon step down from his government post, made his comments after Sen. Elizabeth Warren, D-Mass., sent a letter to SEC Chair Mary Jo White on Tuesday, saying her two-year tenure as head of the financial regulatory agency has been "extremely disappointing."
The letter questioned the number of times White had to recuse herself from rulings due to conflicts of interest related to her former work and her husband's current employment at a corporate law firm. Earlier this year, The New York Times estimated there were four dozen instances in which White had to step aside.
Warren also accused White of misinforming her, saying the chair failed to stick to a timetable in implementing a rule that forces executives to disclose their income relative to their employees. The SEC said it was a misunderstanding.
Gallagher said the notion that White's integrity is in question is disturbing.
"One thing no one should dispute is that Mary Jo White has the utmost integrity," he said. "The agency, the government, the country should be happy to get people like Mary Jo White to come to the SEC."
Asked whether White's recusals had led to stalemate at the SEC, Gallagher said that notion was "absolute nonsense."
Without the independent White, the commission is divided between two conservative and two liberal commissioners.
Gallagher said any SEC backlogs were the result of the commission's inability to cope with the burden of enacting The Dodd-Frank Act, a major piece of regulatory legislation passed in 2010 that aims to prevent future financial crises and protect consumers.
"It's 100 rule-making mandates," Gallagher said. "It's a massive endeavor. It's more than we can handle, and then they expected us to get most of it done in two years. It was an impossible task from the get go. And no one admitted it."
In addition to contending with Dodd-Frank, he said the SEC commissioners must administer 75 years of federal rules and also implement the Jobs Act, which seeks to increase access to capital markets for small businesses.
"Every congressman, every senator—they all have a pet project that they want us to do and when it's not done, they act like we're sitting on our laurels, and it's just not the right story," he said.
If markets are any safer today, it is through the efforts of private markets rather than Dodd-Frank, he said. If anything, Dodd-Frank has diverted regulators attention and contributed to the politicization of the SEC, he added.
Dodd-Frank "is based on false narratives," he said. "If you do a word search in Dodd-Frank for Fannie and Freddie, you'll find only a passing reference. The narratives are built in large part around Wall Street, greed and regulatory failures only. Nothing about housing policy."
The Treasury Department's Financial Stability Oversight Council is not paying attention to signs of a bubble in the fixed income market because it is busy making judgments on which insurance companies and asset managers should be designated systemically important, he said.
"We should be upping our game and being more expert in thinking about liquidity issues in the fixed income markets. We're starting to get there, but we're decades behind quite frankly," he said.
Further, Dodd-Frank draws out commissioners' and regulators' ideology, making debates more political, because the text itself was not tempered in Congress, Gallagher said. It was largely passed with Democrat support.
"Those who care about the agency want to say it's not political. It's a bunch of technocrats not beholden to Congress, not beholden to the executive branch. I will tell you though in all candor, since Dodd-Frank things have become more political."