In 2009, Gary Gensler was confirmed as chairman of the Commodity Futures Trading Commission — the agency responsible for overseeing derivatives markets, the same instruments that had just helped collapse the global financial system. Before taking the job, Gensler had spent eighteen years at Goldman Sachs, rising to co-head of finance.

In 2021, Gensler was appointed chairman of the Securities and Exchange Commission, the primary regulator of American capital markets.

This is not unusual. It is the norm.

How the Revolving Door Works

The revolving door describes the circulation of personnel between the financial industry and its regulatory agencies. The movement flows in both directions:

  • Senior industry executives move into government regulatory positions
  • Regulators leave government for high-paying positions at the firms they formerly supervised
  • Government attorneys who handled enforcement cases are recruited by the defense side of the same cases

Each of these flows creates structural incentives that undermine enforcement:

Industry to government: A regulator who came from Goldman Sachs brings Goldman's worldview, Goldman's relationships, and Goldman's assumptions about what's normal. They are unlikely to regard as criminal the practices they spent two decades performing.

Government to industry: A regulator who knows they will eventually return to the private sector has every incentive to build goodwill with the firms they're currently overseeing. Aggressive enforcement closes doors. Cooperative oversight keeps them open.

The Data on Regulatory Capture

The Project On Government Oversight (POGO) documented over 400 cases between 2001 and 2010 of former government employees — primarily at the SEC, the Department of Defense, and several financial regulatory agencies — filing disclosure forms indicating they would be representing or advising the entities they formerly regulated. In some cases, this happened within months of leaving government service.

At the SEC specifically, a 2011 report from POGO found that 219 former SEC employees had filed 789 "post-employment statements" indicating they planned to use their government experience to benefit private clients. The filings covered regulatory proceedings, examinations, investigations, and rulemakings the individuals had been directly involved in.

The "Too Big to Jail" Problem

In 2013, then-Attorney General Eric Holder told the Senate Judiciary Committee that some financial institutions had become so large that prosecuting them criminally would have "a negative impact on the national economy, perhaps even the world economy." He was articulating — out loud — the idea that size confers legal immunity.

This framing was not accidental. It reflects a regulatory capture that operates at the level of assumption: the idea that major financial institutions are fundamentally different from ordinary defendants, that their executives' decisions can be explained by complexity rather than intent, and that the appropriate remedy for financial crime is a settlement — paid by shareholders, not executives — rather than prosecution.

The Justice Department under Holder brought zero criminal cases against senior executives at major banks following the 2008 financial crisis. The institutions that had committed provable fraud in mortgage-backed securities, foreclosure processing, and LIBOR manipulation paid billions in fines — and their executives kept their jobs and their bonuses.

Who Benefits From the Current System

The revolving door is not primarily a story about individual corruption. Most of the people who pass through it are not taking bribes. They are operating within a system that rewards certain behaviors and penalizes others — and the people who designed that system did so deliberately.

The beneficiaries are clear: the large financial institutions that face reduced enforcement risk, lower regulatory compliance costs, and a higher likelihood that their preferred interpretations of the law will prevail. The losers are everyone else: consumers, smaller competitors, and the broader public that bears the cost of financial instability when enforcement fails.

Following the door — tracking who goes where, when, and from which institution — is one of the most reliable methods for understanding which interests are actually being served by American financial regulation.