By Amit R. Paley
Washington Post Staff Writer
Thursday, December 18, 2008
President-elect Barack Obama has chosen a veteran regulator to head the Securities and Exchange Commission, the beleaguered agency that has been pilloried by lawmakers for failing to prevent the global financial meltdown, senior Democratic officials said yesterday.
The selection of Mary L. Schapiro, who would be the first woman to chair the SEC on more than an interim basis, follows a series of high-profile controversies that have raised doubts about its competence as the chief enforcer of Wall Street under the leadership of its current chairman, Christopher Cox. The SEC's failure to detect Bernard L. Madoff's alleged $50 billion Ponzi scheme before it was revealed last week has prompted even Cox himself to question the agency's performance.
Schapiro, a Wall Street regulator for 20 years with a reputation for tenacity, is likely to push the SEC to become more aggressive in policing the financial industry and advocating the agency's interests as lawmakers push for an overhaul of the financial regulatory structure, according to former officials and colleagues.
"If there is anybody who is going to reinvigorate the SEC, it is Mary," said David M. Becker, a former general counsel at the agency. "I have no doubt that with her leading the SEC, it will show its teeth whenever necessary."
Schapiro, 53, has a history of attracting support from Republicans and Democrats. President Ronald Reagan appointed her as a commissioner at the SEC, where she served for six years and eventually was named acting chair by President Bill Clinton. He later made her the chief of the Commodity Futures Trading Commission.
The fact that she has led both agencies could make it easier for the Obama administration to merge the functions of the two agencies as part of a broad regulatory overhaul expected next year. Key regulators and lawmakers have advocated such a move, arguing that the bifurcation of duties created a gap in oversight that contributed to the financial crisis.
Schapiro, whose selection will be announced today in Chicago, heads the Financial Industry Regulatory Authority, Wall Street's self-regulator known as FINRA. She has worked for the non-governmental group since 1996.
She is likely to face questions during her confirmation hearing about why her organization did not catch the alleged Ponzi scheme run by Madoff. She oversees firms like his.
Rep. Spencer Bachus (Ala.), the top Republican on the House Financial Services Committee, issued a letter yesterday calling for separate hearings "to specifically examine the adequacy of the SEC's and FINRA's examination programs." Such a hearing could put Schapiro on public display among the current cast of regulators even as the incoming administration is presenting her as an agent for change at the SEC.
Several critics of the SEC said yesterday that Schapiro would be an ideal choice who could reverse what they see as the agency's failure to adequately prevent abuses on Wall Street.
"She believes in a vigorous enforcement program and is just the right person to revitalize the Commission," Joel Seligman, an SEC historian, wrote in an e-mail.
In a speech in October, Schapiro said she has pushed for nearly 15 years for more oversight of credit default swaps, a complex and virtually unregulated financial instrument that played a role in the financial collapse.
"Clearly, our regulatory system failed to compensate for the failures of market discipline and failed to appreciate the interdependencies of financial institutions and the risks they shared," she said. "The system did not allow regulators to stay ahead of this crisis and prevent it from ever occurring."
Staff writers Binyamin Appelbaum, Philip Rucker and Anne E. Kornblut and staff researcher Madonna Lebling contributed to this report.