Her pictures are not even on her office wall yet, but Mary Jo White already is getting pulled into an arena in which she’s untested: writing regulations.
Since she took over as head of the Securities and Exchange Commission a month ago, Congress has pressed the former federal prosecutor to pump out long-overdue financial regulations required by the Dodd-Frank Act and rewrite key rules that govern the capital markets. This week, lawmakers are applying more pressure to get the job done — on their terms.
The House passed a measure Wednesday that gives the SEC an Oct. 31 deadline to adopt a portion of the JOBS Act, which aims to make it easier for small businesses to raise money. On Friday, another bill is scheduled to reach the House floor that would reinforce the need for the agency to do thorough cost analyses of any rules it’s considering.
In between, White is scheduled to testify before the House Financial Services Committee, her second appearance on Capitol Hill since her confirmation and maybe her toughest. Committee Chairman Jeb Hensarling (R-Tex.), an outspoken critic of the SEC, is expected to grill her about what he views as a misallocation of the agency’s resources.
The questioning will come at a time when White faces an audition of sorts on Capitol Hill. President Obama nominated White to finish the one year left in the term of her predecessor, Mary Schapiro. The president also tapped White for an additional five-year term. But Senate Republicans were hesitant to consider the longer term without getting a better sense of White on the job, according to Capitol Hill sources familiar with the thinking.
This summer, the Senate is expected to consider approving the full term, and lawmakers will be closely watching. Since White’s name first surfaced for the position, lawmakers on both sides have been wowed by her superstar status in legal circles — first as the U.S. attorney in Manhattan who took down terrorists and then as a white-collar defense lawyer.
But her skills on the regulatory front are the big unknown, especially since there’s no policy background to dissect. This is why the Republicans on the House Financial Services Committee are expected to question her aggressively on her regulatory priorities.
Among Republicans, there’s consternation that the agency is sloughing off congressionally mandated regulations and wasting time on extraneous policy issues.
House Republicans are especially upset that the SEC might consider requiring public companies to disclose their campaign contributions, as requested in a petition filed by a group of law professors in 2011. Campaign finance reform advocates have escalated pressure on the SEC to act since White was nominated.
Former SEC chairman Harvey Pitt said it’s unlikely that White would react to any pressures exerted on her, even from Congress. “When you’ve held the kinds of lofty positions she’s held and handled the complicated matters she’s handled, feeling pressure to keep a job is not really in her DNA,” Pitt said.
Still, White has repeatedly said that getting the congressionally mandated rules done is a top priority, and she’s rapidly putting together a team to do so.
On Wednesday, she tapped Keith Higgins of Ropes & Gray to head the SEC’s corporation finance division, which is heavily involved in writing the JOBS Act rules. She also named Lona Nallengara, who joined the SEC in 2011, as the agency’s chief of staff.
Meanwhile, the SEC staff internally circulated a draft this month to revamp part of the money market fund industry, a plan that’s evolved over the past year. The agency has also proposed a plan for how rules governing derivatives should be applied in the global marketplace. But they are less stringent than what the Commodity Futures Trading Commission has promoted, alarming some investor advocates.
Barbara Roper of the Consumer Federation of America said she understands why White would not want to hold up a complex proposal that’s been in the works long before she reached the agency and extends far beyond her technical expertise.
“But I was listening for some acknowledgment from her that there is significant controversy over this approach, and I didn’t hear it,” Roper said. “The SEC seemed to be consciously positioning itself as the moderate alternative to the CFTC, and that’s precisely the wrong message for her to send.”
Dennis Kelleher, chief executive of Better Markets, said his nonprofit group vehemently disagrees with the SEC's position. But he also said the rules were in the making for so long that they were bound to move no matter who the chairman was, he said.
“With every passing day, her responsibility and accountability for what happens increases,” Kelleher said. “While we’re willing to give her the benefit of the doubt for the transition period, it’s going to expire soon, and then we’ll know. Is the SEC going to get back to protecting Main Street, or is it going to treat Wall Street as a client to be coddled?”