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.”

Naylor suggested that a seasoned prosecutor be named as new SEC chairman, and one dedicated to actual prosecution of high-level executives. “We hear and we can see the evidence that the so-called culture of Wall Street is one that is self-justifying. There is no embarrassment about the enormous paychecks that are being given for essentially socially useless if not destructive work,” he said. “And I think the clearest path, if it’s not an obvious path, to addressing that culture is a steady diet of perp walks.”

Implementation of Dodd-Frank has not been a strong suit of the SEC under Schapiro either. As of November 1, the agency was to have finalized eighty-two Dodd-Frank rules. It has finalized thirty-two, or about 40 percent, failing to even propose rules for eight of them (chart via Davis Polk):

And the rules that were implemented were often weak. For example, this summer the SEC finally implemented a rule on executive compensation. But instead of actually creating standards for compensation, the SEC delegated that responsibility to the stock exchanges and gave them “considerable leeway.”

“The Schapiro legacy, is what I would call ‘delayed and diluted’ on Wall Street reform,” Naylor said.

The most important piece of the Dodd-Frank legislation yet to be implemented is the Volcker Rule to restrict banks from making speculative investments with customer money. That, by the way, is officially dead until the White House either names a new chairman or adds another commissioner, since Schapiro’s departure on December 14 will create a four-person commission presumably deadlocked on partisan lines.

So the White House must act quickly, and there will no doubt be massive industry pressure on Obama not to appoint someone who pushes for fair rules and tough prosecutions. Naylor, though, said he was heartened by recent White House appointments to the FDIC and OCC, and noted that Wall Street has less leverage now: “This time, industry can’t threaten Obama’s re-election,” he said.

Several other important positions will soon be up for grabs. Last week. William Greider proposed Ben Bernanke for Treasury Secretary.