How Will Mary Jo White’s Nomination to the SEC Affect Market Recovery?
Tough, tenacious, aggressive – these are some of the most common adjectives used by news outlets when describing Mary Jo White, President Obama’s nominee for chairwoman of the Securities and Exchange Commission (SEC). These traits, which effective prosecutors often possess, have served Ms. White well in the past and no doubt will continue to do so in the future. However, just how Ms. White’s unique constitution will affect the market and financial industry in coming years is a matter of great interest and speculation.
After all, the SEC’s mission is not only to “protect investors,” but also to “maintain fair, orderly, and efficient markets” and to “facilitate capital formation.” In order to make progress on all these fronts, Ms. White will have to safeguard investors, while also promoting an environment of regulatory certainty and reliability that encourages investment and risk taking.
This will not be an easy task. Ms. White will face pressure from many sources to quickly establish her toughness, tenacity and aggressiveness. First, as the former U.S. Attorney for the Southern District of New York, Ms. White will be expected to assert her prosecutorial credentials in her new position as head of the nation’s financial watchdog; however, the law-and-order approach of a prosecutor may lead to punitive, rather than thoughtful and well-reasoned, policymaking. This tendency may be exacerbated by the pent-up frustration of those who believe that financial institutions escaped punishment for their role in the Great Recession.
Further adding to the pressure, Ms. White has spent many years in the private sector at major law firms, defending financial clients against the kind of enforcement she would now be in charge of spearheading. To shake off the image of closeness with Wall Street, Ms. White may be inclined to take swift, aggressive action, which may do a lot to protect investors but not as much to promote an environment of stability necessary for investment. At her disposal, Ms. White will have the Dodd-Frank law, an expansive effort to reform Wall Street that augments the SEC’s regulatory authority. Under Dodd-Frank, the SEC is expected to promulgate numerous rules, which are already overdue and which could meaningfully affect the way the market operates in the near future.
Despite these understandable pressures, Ms. White has a tremendous opportunity to make progress on all fronts of the SEC’s mission and to advance the nation’s most important economic objective – market recovery. By enforcing existing regulations in a consistent and fair way, and by promulgating new regulations that are needed and digestible, Ms. White’s SEC can help create an environment of sustained, sizable growth. Practically speaking, such a balanced approach would empower businesses and those thinking about starting a business to: (1) change their conduct without substantial compliance costs; (2) make more accurate and confident decisions regarding investing in new jobs and new construction; (3) gain access to capital more easily at lower interest rates; and (4) expand in to new markets while avoiding overly costly barriers to entry, among other things.
In the final analysis, if Ms. White is able to simultaneously leverage her tools as a prosecutor and her understanding of the private sector, she may be able to help improve the public’s confidence in the marketplace while also contributing to America’s road to recovery.