The first casualty of the Obama “transition” is now known: SEC chair Mary Jo White, under whose watch the market became an momentum-igniting, stop hunting mess thanks to the limitless proliferation of HFTs, whose lobby had succeeded in thoroughly penetrating and capturing the market regulator, is leaving at the end of the Obama administration.
To her credit, under White’s tenure, which began in April 2013, the SEC overhauled the regulation of money-market mutual funds, credit-rating firms, stock exchanges, and electronic trading venues, much of it with mixed results.
Mary Jo White plans to step down in January, opening the door to a new Republican-appointed leader. Mary Jo White, a “political independent” appointed by President Barack Obama, said Monday that she will step down as Securities and Exchange Commission chair in January. According to Bloomberg, her “nearly four-year tenure has been highlighted by high-profile enforcement cases and plagued by internal battles that stalled controversial policies.”
It was mostly marked however, by Mary Jo White continuing the policies of her predecessor, and not launching any material actions against major banks, with the occasional hedge fund taking it on the chin.
As Bloomberg adds, with the Senate under Republican control, Trump is likely to have a relatively easy time installing his choices to run the SEC and other agencies, so the vacancy might be filled quickly. The five-seat commission is already two members short and White has essentially represented a tie-breaking vote between Republican Michael Piwowarand Democrat Kara Stein, who split on major issues.
It remains to be seen what tack the president-elect will take in overseeing the financial industry beyond his campaign pledge to dismantle the Dodd-Frank Act, which has dominated regulators’ work since it was enacted in 2010. Former Commissioner Paul Atkins, a Republican who left the agency in 2008, is leading the Trump transition team’s work on independent regulators like the SEC.
After taking the helm in 2013, White moved to improve morale at an agency that had been assailed by lawmakers over its failure to spot Wall Street abuses in the run-up to the financial crisis. Her outreach efforts included handing out coffee and doughnuts to rank-and-file employees, and walking the halls of the agency’s sprawling headquarters to chat with workers. “I also looked past Dodd-Frank, past the financial crisis, pushed the mission of the agency as hard as I could, which produced truly game-changing rulemaking,” White said in an interview. The efforts “strengthened investor protections and our financial system, laying the groundwork for future regulatory regimes and aggressive enforcement, ” she said.
Ironically, retail investor interest in the stock market has remained flaccid, with the bulk of trading taking place by institutions and electronic traders and HFT algos.
As the WSJ correctly notes, White’s departure creates uncertainty in the short run because the SEC would have to operate with just two of the five commissioner seats filled after she leaves. Gridlock could ensue because one commissioner would have an effective veto on any regulatory decision or enforcement action.
“Everything under Dodd-Frank is now up in the air,” said Scott Kimpel, a partner at Hunton & Williams LLP who previously worked as a legal adviser to a Republican SEC commissioner.
White’s departure in January would leave Piwowar, the sole sitting Republican, as the likely acting chair until a permanent replacement is confirmed by the Senate.
While it’s early in the process, Bloomberg reports that a number of names are being floated as possible contenders. Gallagher and Atkins, who is chief executive officer of Patomak Partners, are both possible contenders as are Proskauer Rose LLP lawyer Ralph Ferrara, a former SEC general counsel; and SkyBridge Capital founder Anthony Scaramucci, who’s on the executive committee of Trump’s transition team. Representative Scott Garrett, a New Jersey Republican who lost his re-election bid last week, is being pushed as a possibility by Tea Party Republicans.
White, 68, hasn’t said what she plans to do next. After serving as the U.S. Attorney for the Southern District of New York under President Bill Clinton, she had a lucrative law career representing banks and other clients. She will most likely be the latest member of the SEC’s infamous revolving door and end up back on Wall Street, or working in a consultancy where she will be paid by lobbying groups to promote the interests she defended against while at the SEC. Her husband, former SEC official John White, is a partner at law firm Cravath, Swaine & Moore LLP.
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