Mary Jo White, President Barack Obama’s nominee for chair of the U.S. Securities and Exchange Commission, faced little resistance from senators during her March 12 confirmation hearing. Primarily, she fielded questions about rulemaking priorities and potential conflicts, and reiterated her commitment to aggressive enforcement.
"I don’t think there is anything more important than vigorous and credible enforcement of the securities laws," White said during the almost two-hour hearing. "It must be done."
White testified alongside Richard Cordray, Obama’s pick to lead the Consumer Financial Protection Bureau, before the Senate Committee on Banking, Housing and Urban Affairs.
Committee Chairman Tim Johnson, D-S.D., was first to question White on potential conflicts regarding the work she did on behalf of financial services clients during her more than 10 years as chair of Debevoise & Plimpton’s litigation department.
"Before I agreed to be nominated for this position, I detailed to the White House, the independent office of government ethics and the career SEC ethics official, the nature and extent of my and my spouse’s and my firm’s legal practices to be certain that there would be no conflicts that could be problematic or limit my ability to function effectively," White said in response. "I’m very scrupulous about these issues and I place a high bar on them."
During White’s tenure at the firm, Debevoise & Plimpton represented The Carlyle Group, Goldman Sachs, BB&T, Morgan Stanley, Barclays Capital, Bank of America, Credit Suisse, Deutsche Bank Securities, HSBC, and Wells Fargo Securities, among other financial clients.
In a Feb. 5 letter to SEC ethics officials, White indicated that her husband, John White, would convert to a non-equity partner at Cravath, Swaine & Moore to help eliminate potential conflicts. He would be the first non-equity partner in the firm’s history.
Senator Sherrod Brown, D-Ohio, also pressed White about her most recent private practice stint, asking whether her former job would hamper her ability to represent the best interests of the American public. She responded with an emphatic "no."
"I’ve been a lawyer over the last 10 years, and when you’re a lawyer you represent different types of clients and you are ethically bound to represent them to the best of your ability and I have done that," White said. "This has not changed me as a person. It does not mean that I embraced the policy thoughts of any of my clients in particular. I think that the public investor should know that I am their advocate… In this instance if I am confirmed, the American public will be my client and I will work as zealously as is possible on behalf of them."
Senator Mike Crapo, R-Idaho, questioned White about whether the commission would propose a rule governing money-market mutual funds. Former SEC Chairwoman Mary Schapiro tried and failed to reform the structure of money-market mutual funds. In November, the Financial Stability Oversight Council voted to move forward with proposed recommendations to reform money-market mutual funds in an effort to push SEC officials to propose its own. White said that as chair, she would make sure the agency proposed a rule.
"Money market mutual funds, which are very important investment products, I think are in the heartland of the SEC’s expertise and I think it is the SEC’s responsibility…to determine what additional reforms there should be," White said.
To date, the SEC has finalized 33 of 95 rules it is required to implement as part of the Dodd-Frank Act. Among the major pieces still lacking: rules for swaps, for which Title VII of the act gives the SEC oversight; and a final version of the so-called Volcker Rule, which includes a ban on banks making short-term trades for their own profit. White said it would be her priority to see that rules related to Dodd-Frank are implemented in a timely and smart fashion. "The SEC needs to get these rules right, but it also needs to get them done," she said.
Senator Robert Menendez, D-N.J., asked White whether financial institutions were "in essence protected against prosecution merely by their size."
White said in response that while the SEC does not have criminal prosecution powers, it would charge banks regardless of size. "There is no institution too big to charge," she said.
White earned a reputation as a tough prosecutor during her tenure as the U.S. attorney for the Southern District of New York. She oversaw the successful prosecution of infamous mob boss John Gotti and the terrorists responsible for the 1993 World Trade Center bombing, namely Ramzi Yousef and Omar Abdel-Rahman, "The Blind Sheikh."
White & Case partner Gregory Little said that White’s "thoughtful and sincere" answers to the committee would help set her on the path toward a smooth confirmation process.
"There is no question that she should have a very easy confirmation," said Little, who is based in New York. "I don’t think it was because they were easy on her, but that she is so well qualified."
Meanwhile, Democrats took the opportunity to blast Republicans for stalling the confirmation of Cordray. Brown, who introduced Cordray, said this was the first time in history that the minority blocked the confirmation of a nominee strictly because of opposition to an agency.
"Senators are blocking a nominee simply because of the agency he will lead," Brown said in his introduction of Cordray. "Now is the time to consider Rich Cordray’s qualifications, not continue fighting old battles."
Senator Elizabeth Warren, D-Mass., who was once considered to head the agency, took a particularly aggressive stance against Republican opposition to Cordray’s nomination.
"I see nothing here but a filibuster threat against Director Cordray as an attempt to weaken the consumer agency," Warren said.
Republicans have staunchly opposed the CFPB since Congress created the agency when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Republicans have voiced that they want changes to the agency before approving any nominee.
In January, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit deemed Obama’s recess appointments to the National Labor Relations Board unconstitutional. The labor board announced today that it plans to file a petition for cert with the U.S. Supreme Court. Cordray was appointed via recess appointment in January 2012.
"Until there is a ruling by the court saying that Cordray was unlawfully appointed and they have taken that as far up as they will go, I don’t think the Democrats or Obama are going to be in any mood to negotiate changes in the CFPB," said Alan Kaplinsky, a partner at Ballard Spahr. "Politically there is no solution that is imminent."
@| Matthew Huisman is a reporter for The National Law Journal, an affiliate, and he can be reached at firstname.lastname@example.org. Jenna Greene, also of The National Law Journal, contributed to this report.