Mary Jo White, President Obama's SEC nominee and John Gotti’s prosecutor, is by all accounts a great choice for the watchdog. But a number of observers are debating whether she is really the right pick at this time.
Mary Schapiro, appointed by Obama in 2009, was supposed to hunt down crime on Wall Street. To a certain extent, she did that: the SEC slapped Goldman Sachs with a $550 million fine for putting together the ill-fated mortgage bond Abacus, as well as Citigroup and JPMorgan Chase. As Fortune notes, the SEC also mandated that Countrywide's Angelo Mozilo should personally pay a $22.5 million fine, the largest by an individual in history.
Still, those were the exceptions. No one was ever charged at Lehman Brothers or AIG. In fact, some argue that the SEC actually covered up Wall Street crime.
Some observers have serious reservations about Mary Jo White. The New York Times notes that she built a “lucrative legal practice defending Wall Street executives, a potential concern for consumer advocates.”
Matt Taibbi recalls in Rolling Stone White’s role in “ the squelching of then-SEC investigator Gary Aguirre's investigation into an insider trading incident involving future Morgan Stanley CEO John Mack. While representing Morgan Stanley at Debevoise and Plimpton, White played a key role in this inexcusable episode,” he argues.
Others point out that White’s impressive background when not focusing on Wall Street’s corridors of power – she also prosecuted those responsible for the 1993 World Trade Center bombing -should enable her to restore the SEC’s image as a tough regulator.
After all, she reportedly refused to sign off on President Clinton's pardon of oil trader Mark Rich, and briefly investigated it, Fortune notes. KBW's head of research in Washington, Brian Gardner, told clients "We expect the SEC's investigations to become more aggressive but, at the same time, more thorough.”
But should a crime fighter really be top of the list for Wall Street right now? It may look good on paper – fighting crime is a headline-grabbing and highly commendable occupation. However, as Fortune notes, enforcement is only one part of what the SEC does.
The agency’s main job – and presumably most of its resources – should be dedicated to regulating a highly complex industry to make sure it’s fair to everyone. In light of the number of high-profile technology glitches that hit the markets in 2012, ex-SEC chief Mary Schapiro had been focusing on potentially regulating high frequency traders before she left. But high-frequency trading and other market complexities is apparently not an area where White has a lot of experience.
What the capital markets need right now, as the New York Times suggests , is someone who can write dozens of rules to carry out the Dodd-Frank act.
A focus on crime fighting will certainly win the popular vote - and allow high-frequency traders and other honest market participants to breathe a collective sigh of relief. But in the long-term, a high-profile crime-buster might not be what the markets need.