Call it the ultimate retirement speech. James Kidney, a trial attorney for the Securities and Exchange Commission, used a recent goodbye party to criticize the agency for being too “tentative and fearful” in confronting wrongdoing on Wall Street.

In his remarks — which were first reported on by Bloomberg News — Kidney took the SEC to task for being too lenient with banks that helped fuel the financial crisis by bundling toxic loans and then selling them to unsuspecting investors. Kidney said the SEC has done an especially poor job of holding executives accountable, and as a result the public now sees the agency as one “that polices the broken windows on the street level and rarely goes to the penthouse floors.” When SEC action does extend to the corporate suite, he said, “Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening.”

Others have been critical of the government’s response to the meltdown, but what makes Kidney’s remarks unique is that they are a rare example of an SEC insider publicly echoing the same sentiment. As FRONTLINE reported in the 2013 investigation, The Untouchables, no senior executive from a major financial firm has been prosecuted for the financial crisis, but both the Justice Department and SEC have secured a number of high-profile penalties.

Kidney joined the SEC in 1986, winning at least a half-dozen insider-trading trials during his tenure there. One of his last major assignments was the agency’s sub-prime mortgage probe of Goldman Sachs, which was settled in 2010 for $550 million. While the investigation led to a civil case against Fabrice Tourre, a Goldman vice president, a recent report in The American Lawyer detailed a failed internal push by Kidney to pursue more senior executives.

“My experience in this case still bothers me a lot,” Kidney said in sworn testimony taken in the summer of 2010 and obtained by The American Lawyer through a Freedom of Information Act request. “We take extraordinary inferences and apply them to common little people,” he said. “It still bothers me that we had a lot more than inference here and we didn’t do anything with it.”

Kidney took himself off the team that was pursuing the Goldman case after he was given a lesser role in the investigation, Bloomberg reported.

In an interview with Bloomberg, Kidney said he did not intend to use his retirement address to single out any particular official at the SEC. In his March 27 remarks, however, he was critical of what he called a “very serious” revolving door problem at the agency.

“I have had bosses, and bosses of my bosses, whose names we all know, who made little secret that they were here to punch their ticket,” he said. “They mouthed serious regard for the mission of the commission, but their actions were tentative and fearful in many instances.”

Adding that his superiors were often focused on securing high-paying jobs after their work for the government — and not on bringing difficult cases — Kidney said the agency’s penalties have become “at most a tollbooth on the bankster turnpike … We are a cost, not a serious expense.”

Kidney’s complete remarks are available here.

Jason M. Breslow, Former Digital Editor

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FrontlineEditors@wgbh.org

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