President Obama's choice to head the Securities and Exchange Commission has prosecuted terrorists and mobsters. If she's confirmed, Mary Jo White's next challenge will be tackling reckless behavior on Wall Street.
White, who spent nearly a decade as U.S. Attorney in New York City, would be the first former prosecutor to lead the SEC. She oversaw successful prosecutions in the 1993 World Trade Center bombing and against mafia boss John Gotti, as well as numerous white-collar criminals. The White House highlighted that background in an apparent signal to would-be wrongdoers in the financial sector.
"Since she was such a tough prosecutor, and had an unwaving interest of extracting pretty good sanctions against individuals, it would be part of her DNA to expect that she'd want to see more individuals prosecuted," says James Cox, an expert in securities law at Duke University. "Whether it's going to be successful (depends) on the political climate of the SEC and the ability to change an agency culture."
Unlike the U.S. Attorney's office, the SEC prosecutes only civil cases, not criminal ones. Most of its cases end in settlements, often with no admission of wrongdoing.
"Unfortunately, the culture that's developed at the SEC over the last 15 to 20 years is a body-count process," Cox says, with a focus on settling a large number of cases, rather than individual penalties that might serve as a greater deterrent.
The Obama administration says by nominating White, the president is showing his commitment to enforcing rules of the road on Wall Street. Many of those rules are still being written. The SEC is responsible for drafting rules to implement key parts of the 2 1/2-year-old law passed in response to the financial crisis.
"When the president signed the financial reform law, that was half-time," says Scott Talbott of the Financial Services Roundtable, an industry trade group. "The legislators left the field and now it's time for the regulators to take over. And we are about halfway through the third quarter of implementation of a 2,000-page law."
Financial firms have challenged the so-called Volcker Rule, which limits banks' ability to trade on their own behalf, as well as separate regulations designed to safeguard money market accounts.
"There is a tendency following a crisis to over-regulate," Talbott says. "The pendulum rarely stops at the bottom. So we want to see that we don't over-regulate here."
Since leaving the U.S. Attorney's office in 2002, White has served as a director of the Nasdaq stock exchange and also defended clients accused of financial fraud. She has fewer ties to Wall Street than some earlier SEC leaders, which could be a political advantage.
"Unfortunately, investor groups don't have the same influence on the Hill as does Wall Street," Cox said.
The president also re-nominated Richard Cordray as director of the Consumer Financial Protection Bureau, a new agency designed to protect people from risky financial products. Last year, Obama used a recess appointment to install Cordray in the post over Republican opposition. The recess appointment expires at the end of this year.
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