Securities and Exchange Commission (SEC) Chair Mary Schapiro. (AP Photo/Charles Dharapak)
Securities and Exchange Commission chairman Mary Schapiro’s departure, expected for months and announced today, creates an opportunity to vigorously pursue a new era at the agency of tough enforcement and the implementation of strong new rules on Wall Street behavior.
But who should that new chairman be? The White House said it will elevate Elisse Walter, a current commissioner, to the chair’s spot, but that can last only until the end of 2013 because the administration is not naming her permanent chair and not seeking Senate confirmation. It is likely, I’m told, that a different chair will be named, possibly within weeks.
Advocates of strong financial reform say that to understand what is needed in a new SEC chair, one needs only to look at where, and how, Schapiro fell short. And in their view, she fell quite short.
“We think that she was slow and unambitious in using the Dodd-Frank Wall Street reform to institute strong, important, necessary rules,” Bart Naylor, a former chief of investigations for the Senate Banking Committee and now a financial policy advocate at Public Citizen, told The Nation. “We [also] think that she failed to prosecute criminal referrals to the obvious misdeeds on Wall Street that we witnessed during the financial crash. We hope the president will name somebody that is ambitious, aggressive and assertive as her permanent replacement.”
These are the twin goals that most reformers agree the SEC must embrace in the years ahead: making sure Dodd-Frank is implemented strongly without undue influence from the financial industry, and pursuing enforcements that create a real disincentive on Wall Street towards destructive behavior. The fact that the House of Representatives remains a presumably closed door to any significant financial reform over the next two years, at least, only elevates the importance of the SEC.
While Schapiro did overhaul the SEC’s enforcement division, appointing former federal prosecutor Robert Khuzami to lead it and filing dozens of cases related to the financial crisis, it was consistently criticized for failing to win big penalties and failing to prosecute high-ranking executives.
One year ago, for example, a federal judge in New York presiding over a proposed SEC settlement with Citigroup related to the pre-crash sale of mortgage-backed securities blasted the agency in court for agreeing to paltry dollar amounts where no wrongdoing is admitted. Judge Jed Rakoff said he couldn’t tell what the SEC gained from a $285 million settlement with the bank “other than a quick headline,” and for an amount that “is pocket change to any entity as large as Citigroup.”