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Cady Bar the Door Insight & Commentary on SEC Enforcement Actions and Related Issues

New Article Pushes the Revolving Door

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I’ve always been a little skeptical of general complaints about the “revolving door” between government service and employment in the private sector.  As applied to the SEC, the complaint goes that low-paid government workers go easy on the Wall Street firms they’re supposed to regulate.  In exchange, those firms lavish lucrative employment opportunities on those government staff once they resign and re-enter the private sector.  Many, many people think this is true.  I never have.  Instead, I’ve generally thought that if a government lawyer wanted to make a lot of money in the private sector one day, he ought to – I don’t know – be a really effective government lawyer and thereby demonstrate skills that could be useful for others as well.

As it turns out, David Zaring, a law professor at Penn’s Wharton School, pretty much thinks the same thing.  Only he doesn’t apply mere anecdote and half-baked analysis the way I do.  He has written an actual paper in the Illinois Law Review, Against Being against the Revolving Door, with footnotes and everything.  As Zaring says in the article’s preamble:

[T]he revolving door’s explanatory power is remarkably overstated, especially when the subject is law enforcement. Most government officials have plenty of reasons to do a good job, and sometimes a successful stint in the public sector enhances private sector earning potential, to say nothing of more immediate civil service prospects.  The revolving door may also foster citizen participation in government. A study of the careers of a tranche of elite Manhattan prosecutors does not reveal any evidence of those who leave doing the bidding of those they regulate while in public service.

Zaring’s empirical study of prosecutors in the Southern District of New York, with results reported in the article, is fairly compelling.  It certainly does not show that Wall Street law and financial firms rewarded those prosecutors for laxity and corruption while in government service.  He also asks a question that I have wondered to myself, and probably to others I’ve forced to listen: what is the alternative?  Having entered into public service, do government staff forever sign away the ability to work elsewhere?  Can government agencies never benefit from private sector experience after competent and willing outsiders decide they’d like to try working for the United States?   As you’ll learn if you read the piece, there are some strong legal arguments against a state of affairs like that.  Also, as law review articles go, it’s pretty readable, so if you’re going to read one this year, make it this one.