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Obama's new Wall Street cops

26 Jan 2013 THE AGE
BY BY BEN PROTESS AND BENJAMIN WEISER


THE White House has delivered a strong message to Wall Street, taking the unusual step of choosing two former prosecutors as top financial regulators.

But translating that message into action will not be easy, given the complexities of the market and Wall Street's aggressive nature.

At a short White House ceremony, US President Barack Obama named Mary Jo White, the first female US attorney in Manhattan, to run the Securities and Exchange Commission.

Mr Obama also renominated Richard Cordray as the director of the Consumer Financial Protection Bureau, a position he has held for the last year under a temporary recess appointment without Senate approval.

With the appointments, the President showed a renewed resolve to hold Wall Street accountable for wrongdoing, extolling his candidates' records as prosecutors.

Ms White spent more than a decade as a top federal prosecutor in New York City, overseeing the prosecution of the crime boss John Gotti and those responsible for the 1993 World Trade Centre bombing. As an Ohio prosecutor, Mr Cordray filed lawsuits against Bank of America and the American International Group.

"It's not enough to change the law," Mr Obama said. "We also need cops on the beat to enforce the law."

Still, Ms White and Mr Cordray face their own challenges.

While Ms White is best known as an aggressive prosecutor, she also built a lucrative legal practice defending Wall Street executives, a potential concern for consumer advocates. And she lacks experience in the financial minutiae central to a regulatory role.

Mr Cordray presents another potential problem for the White House. The Senate last year declined to confirm him in the face of Republican and Wall Street opposition to the newly created consumer bureau. Several Republicans on Thursday again voiced their concerns.

Both Ms White and Mr Cordray arrived in Washington as outsiders from the Midwest. A five-time Jeopardy champion from Ohio, Mr Cordray became the consumer bureau's enforcement chief after losing re-election for state attorney-general. As Ohio's top prosecutor, he became known as the Midwestern sheriff of Wall Street.

Ms White, who was born in Kansas City, changed career paths after graduating with a masters degree in psychology. She obtained a law degree from Columbia University in 1974, and a few years later began her first stint as a federal prosecutor in Manhattan.

She ultimately became the US attorney in Manhattan, earning a reputation as a tenacious prosecutor with an independent streak. Ms White embraced the often-repeated joke that her office was the US attorney for the "sovereign", rather than southern, district of New York.

With her prosecutorial victories and independent political status, she is expected to receive broad support on Capitol Hill.

If confirmed, she will succeed Elisse Walter, a long-time SEC official, who took over as chairwoman after Mary Schapiro stepped down as the agency's leader in December. Ms Schapiro, a seasoned policymaker and specialist in market structure, overhauled the agency after it was blamed for missing the warning signs of the financial crisis. Ms White built her career on the law-and-order side of the securities industry, with just a brief stint as a director of the Nasdaq. The gaps in her resume could complicate her agenda in the face of fierce Wall Street lobbying.

Under the next chairman, the agency must write dozens of rules to carry out provisions of the Dodd-Frank Act, a regulatory overhaul passed in response to the financial crisis. The agency also must grapple with the increasingly complex markets and rapid-fire trading that dominate Wall Street.

Ms Schapiro also argued that Ms White's outsider status could inject new life into the agency. "Nobody comes in an expert across the board," Ms Schapiro said. "A fresh look on some of these policy issues might be exactly what we need."

Ms White could face additional questions about her career, a revolving door in and out of government. In private practice, she defended some of Wall Street's biggest names, including Kenneth Lewis, a former chief of Bank of America. As the head of litigation at Debevoise & Plimpton, she also represented JPMorgan Chase and the board of Morgan Stanley.

Barbara Jones, who retired recently from the federal bench in Manhattan and now practises law at the firm Zuckerman Spaeder, said Ms White, a close friend, would benefit from having both prosecuted and defended executives during her career.

"She has been on both sides," Ms Jones said. "She will be tough when she has to be, but she'll be fair."

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