WASHINGTON – The leadership of the Securities and Exchange Commission will change next month. Its approach to regulation probably won’t.
Mary Schapiro will step down as chairwoman after a tumultuous tenure in which she helped lead the government’s regulatory response to the 2008 financial crisis.
Replacing her will be Elisse Walter, one of five SEC commissioners, whose career path has tracked Schapiro’s for nearly three decades.
Walter has served under Schapiro, 57, at both the SEC and the Financial Industry Regulatory Authority (FINRA), the securities industry’s self-policing organization. Both women worked at the SEC in the 1980s. Walter was also general counsel of the Commodity Futures Trading Commission when Schapiro led that agency in the mid-1990s.
President Obama on Monday announced his choice of Walter, who will take over at a critical time for the SEC, which is seeking stricter rules for money-market mutual funds and must get into shape the so-called Volcker Rule, which would bar banks from making certain trades for their own profit.
The agency is also pursuing enforcement actions against banks over their sales of risky mortgage securities before the housing bust.
Obama can fill the SEC chairman’s job without Senate approval because Walter has already been confirmed as an SEC commissioner through 2013. That means Obama can avoid a potential confirmation fight until after the White House and Congress address the package of tax increases and spending cuts set to kick in next year.
The president will need to nominate a permanent successor before Walter’s term ends in December 2013.
At FINRA, Walter was Schapiro’s “right-hand person,” said James Cox, a Duke University law professor and expert on securities law.
Cox said he wasn’t surprised that both of Obama’s choices to lead the SEC have come from an industry self-regulatory organization.
The Obama administration “is not an eager regulator of the securities markets,” he said.
John Coffee, a professor of securities law at Columbia University, said Walter’s leadership would likely resemble Schapiro’s. She was Schapiro’s “close assistant” and “has positions almost identical with Schapiro,” Coffee noted.
Walter, a 62-year-old Democrat, was appointed to the SEC in 2008 by President George W. Bush. Earlier, she was a senior official at FINRA, which Schapiro led before becoming SEC chairwoman in January 2009.
Schapiro’s challenges have probably been the most difficult any leader of the SEC has faced, said John Coffee, a professor of securities law at Columbia University. She took office after the financial crisis and Bernard Madoff’s Ponzi scheme had eroded public and congressional confidence in the SEC. Since then, the agency has continually struggled with budgetary shortfalls.
“The Madoff scandal made Congress reluctant to fully fund the agency,” Coffee said.
Schapiro will leave the SEC on Dec. 14. She was appointed by Obama in the midst of the worst financial crisis since the Great Depression and is credited with helping reshape the SEC after it was accused of failing to detect reckless investments by many of Wall Street’s largest financial institutions before the crisis. She also led an agency that brought civil charges against the nation’s largest banks.
Under Schapiro, the SEC reached its largest settlement ever with a financial institution. Goldman Sachs & Co. agreed in July 2010 to pay $550 million to settle civil fraud charges that it misled investors about mortgage securities before the housing market collapsed in 2007. Similar settlements followed with Citigroup Inc., JPMorgan Chase & Co. and others.
The Goldman case came to symbolize a lingering critique of Schapiro’s tenure: No senior executives were singled out. The penalty amounted to roughly two weeks of Goldman’s earnings. And Goldman was allowed to settle the charges without admitting or denying wrongdoing, as were other large banks that faced similar charges.