In Defense of the Revolving Door
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What’s wrong with a revolving door?
There is much hand-wringing over news that Robert Khuzami, the former chief enforcer at the Securities and Exchange Commission, has taken a private-sector job at law firm Kirkland & Ellis, generally to defend companies against actions brought by the SEC. It has been criticized as being a “revolving door” move that highlights the cozy relationship between regulators and the regulated companies they hope to work for someday.
In reality, though, it is the kind of move that can help both the private sector and government alike.
Khuzami has played both sides of the public-private buffet. He was a federal prosecutor first, then joined Deutsche Bank in 2002. In 2009, he went back into public service at the SEC -- where he was immediately criticized for not being tough enough on Deutsche Bank for its role in the housing-market collapse.
Truth be told, Khuzami was actually innovative at the SEC. He restructured the enforcement division, with a clearer focus on targets and a better use of its small resources. Those were the kinds of things that caught the private-sector’s eye -- probably because he learned resource maximization and efficiency in the private sector to begin with.
If he had been a career bureaucrat, as some of the revolving-door critics would hope, he would be of little use to the outside world. And while Khuzami is getting the negative attention, similar moves are happening across the country, at all levels. How many tax firms employ former examiners from the Internal Revenue Service? How many retired colonels work at defense contractors? Dollars to donuts, your trademark attorney spent some time working with the Commerce Department. The private sector values the experience and picks away the best of the bunch. “The best minds are not in government,” Ronald Reagan once said. “If any were, business would steal them away.”
So Kirkland & Ellis is stealing away Khuzami, to the tune of $5 million a year. The government wouldn’t pay anywhere near that -- nor should it, if it is going to rely on tax dollars for the bulk of its revenue -- but the private sector can, and does, when it feels it is worth it.
Locking the revolving door prevents government from applying the valuable experience of someone from the private sector, while also stopping companies from attracting the best and the brightest public servants. Both sides would suffer.