WASHINGTON â€" Mary Jo White moved closer to becoming a top Wall Street regulator on Tuesday as she sailed through a Congressional confirmation hearing. But even her supporters on Capitol Hill pointed to significant challenges awaiting the next leader of the Securities and Exchange Commission.
While she received a friendly reception during two hours of testimony, the Senate Banking Committee grilled Ms. White, the nominee for S.E.C. chairwoman, on her regulatory agenda, demanding that Ms. White complete new rules for Wall Street and take aim at financial fraud. Lawmakers argued that the agency, four years after the financial crisis, must confront a broad array of problems facing the public markets.
Ms. White promised to tackle enforcement actions and unfinished regulation, but offered scant details on her plans. She did, however, signal a flexible approach to reforming money market funds, an approach that could draw scrutiny from investor advocates and liberal lawmakers.
Some lawmakers aso pressed her to outline her strategy for navigating conflicting interests, another potential hindrance for her early days at the S.E.C.
Ms. White, who for decades bounced between roles as a federal prosecutor and a Wall Street defense lawyer, must recuse herself from investigating former clients for at least a year. After defending JPMorgan Chase for its role in the financial crisis, for example, Ms. White could have to sit out an S.E.C. investigation into the bank’s recent $6 billion trading loss.
Senator Sherrod Brown, an Ohio Democrat who has sounded alarms about Ms. White’s turns through the revolving door connecting government and private practice, stressed the possible conflicts on Tuesday. “Nobody questions your integrity but we need some reassurance,†he said. “What have you done over the last decade,†he asked, that would comfort “ordinary investorsâ€
Ms. White explained that her work for Wall Street “does not change me as a person. It doesn’t mean I em! brace the policy thoughts of any of my clients.†Now, she said, “The American public will be my client, and I will work as zealously as is possible on behalf of them.â€
Despite fielding some concerns from the Senate Banking Committee, Ms. White easily cleared the latest hurdle to her nomination. Showing no signs of strain, she struck a confident tone and maneuvered around the thorniest questions, prompting both laughter and praise from lawmakers.
The hearing cleared the way for the committee to vote on Ms. White’s nomination as early as next week. Congressional officials expect her to ultimately cruise through the full Senate confirmation. Even one of the committee’s Republicans, Tom Coburn of Oklahoma, declared his intention to vote for Ms. White
Senator Charles E. Schumer, Democrat of New York, set the tone from the start of the hearing. He praised Ms. White’s “long and distinguished career†as the first female United States attorney in Manhattan and ticked off a litany o awards she won for prosecuting terrorists. Mr. Schumer also noted her playful side: animal enthusiast, motorcyclist, basketball player and lover of cold beer.
“The same toughness she shows playing basketball she will show as S.E.C. chair,†he said, eliciting an uproar of laughter in the hearing room. “She will score many points and not commit too many fouls.â€
But Ms. White will encounter significant obstacles at the S.E.C., an agency that finds itself in a critical transition period. When Mary L. Schapiro became the S.E.C.’s leader four years ago, she faced a daunting task. Her primary job was to restore legitimacy to an agency blamed for missing the financial crisis.
With the agency now back from the brink, lawmakers say that Ms. White must elevate the agenda to take on topics outside her predecessor’s regime. Ms. White, for example, vowed to examine the growing world of high-frequency trading, an issue that continues to confound the agency.
As for the dozens of ! unfinishe! d rules under the Dodd-Frank Act, Ms. White called them an “immediate imperative.†But the agency to date has come up short, falling behind on dozens of Wall Street reforms, including the so-called Volcker Rule that reins in risky trading at big banks.
Ms. White will also step into the contentious debate over money market funds, the investments that needed government assistance to survive during the crisis. It’s a sore spot for the agency after internal bickering and industry lobbying halted reform last year. While Ms. White promised that the S.E.C. would tackle the topic again, she indicated that any new rules would not interfere with “the value†of the funds.
Her words alarmed investor advocates, including some of Ms. White’s staunchest supporters, while others noted that it was too soon to read much into her stance. The advocates argue that a regulator’s job is to protect investors, not the funds that cater to them.
“Preserving the money market fund product is not an appopriate public policy goal,†said Dennis Kelleher, the head of Better Markets, an advocacy group that has praised Ms. White’s credentials.
Ms. White, the head of litigation at Debevoise and Plimpton, also faces questions about her role in some S.E.C. enforcement cases.
Citing the “very high bar†she sets for herself when confronting ethical issues, Ms. White explained that she would avoid former clients for a year. In addition to potentially stepping back from the JPMorgan investigation, Ms. White might also temporarily avoid cases involving UBS and other clients.
Lawmakers questioned whether such recusals, even if well intentioned, might cripple her authority.
“How will you signal that wrongdoing will not be tolerated†asked Senator Tim Johnson of South Dakota, the committee’s Democratic chairman.
“I don’t think there’s anything more important than vigorous and credible enforcement of the securities laws,†she replied. “I’ll be very focused on ! that thro! ughout my tenure.â€
