March 12, 2013 / 3:50 PM / in 5 years

UPDATE 3-SEC nominee White says Wall St legal work no barrier to job

* White, CFPB nominee Cordray face confirmation hearing

* White says expects recusals to be “narrow,” will not harm work

* Republicans may block Cordray as seek changes to bureau

By Emily Stephenson and Sarah N. Lynch

WASHINGTON, March 12 (Reuters) - Mary Jo White, President Barack Obama’s choice to lead the U.S. Securities and Exchange Commission, told lawmakers that her past legal work for Wall Street clients would not prevent her from being a tough financial watchdog.

White, a former U.S. Attorney for the Southern District of New York, must step aside from certain work related to clients in her most recent job as an attorney at Debevoise & Plimpton.

She said she could participate fully in writing rules to implement the Dodd-Frank financial reform law and other regulations such as new money-market fund rules, playing down concerns of possible conflicts of interest.

“The American public will be my client, and I will work as zealously as possible on behalf of them,” White told the Senate Banking Committee on Tuesday during a hearing focused on her nomination.

She appeared alongside Richard Cordray, President Barack Obama’s choice to lead the Consumer Financial Protection Bureau.

White is expected to be easily confirmed by the U.S. Senate. She received little pushback or sharp questioning from members of the banking committee.

The committee’s Chairman Tim Johnson, a South Dakota Democrat, told reporters he hopes to hold confirmation votes for White and Cordray soon but has not set a date. Idaho Senator Mike Crapo, the top Republican on the committee, said he was not aware of opposition to White’s confirmation.

Cordray’s appointment has drawn more opposition from Republican senators who want changes in the structure of the consumer bureau before they will vote to approve anyone to head it. For White, the hearing was the first public opportunity to discuss her background and views on financial regulation.

Some critics have said problems could arise from her legal defense work for clients such as JPMorgan, former Bank of America CEO Ken Lewis, UBS and accounting giant Deloitte & Touche LLP.

White said the recusals she will face “are not out of the ordinary” compared with prior SEC chairmen.

“There’s no question she is going to sail through. That was a very smooth hearing, and it appears she is going to be very aggressive,” said Thomas Sporkin, a former top SEC official who is now in private practice at the law firm BuckleySandler.

He said that while White sounded like she wants to be tougher on enforcement than previous SEC administrations, it could prove difficult to go after more individuals in cases of Wall Street misconduct because of the way big financial institutions are structured.


White would join the agency as the deeply divided SEC works through dozens of rules called for by the Dodd-Frank law and the Jumpstart Our Business Startups (JOBS) Act, a proposal to reform the $2.6 trillion money market fund industry, and rules to potentially revamp U.S. equities market structure.

Without a deciding fifth vote, little rulemaking has taken place since Elisse Walter took over as chairman in December.

Senator Elizabeth Warren, a Massachusetts Democrat who previously set up the consumer bureau, said the SEC has fallen behind on writing rules required by Dodd-Frank.

“The consumer agency has met virtually all of its rule-writing deadlines,” Warren said. “The SEC has missed about half of them so far.”

White said completing rule-writing required by Congress would be among her top priorities and that she would tend to other initiatives, including new rules for money market funds.

Last year, former SEC Chairman Mary Schapiro sought to propose money funds rules, but commissioners could not agree on an approach. The Financial Stability Oversight Council, made up of the heads of financial regulatory agencies including the SEC, has since proposed its own money market framework in an effort to pressure the SEC to act.

White said the SEC should handle any new regulations for the industry. “It’s an investment product, it’s where the SEC has expertise, and I think they should take the lead,” White said.

She did not give an opinion on a specific course of action, saying she had not discussed it with other commissioners.

Writing all the delayed rules quickly could be tricky, said Dennis Kelleher, president of pro-reform group Better Markets.

“Taking on Wall Street while tackling systemic risk, money market funds, credit rating agencies, enforcement, Volcker rule, economic analysis, executive compensation and so much more may make prosecuting terrorists look easy by comparison,” he said.


Cordray’s confirmation could be more difficult to secure, as Republicans have refused to confirm a CFPB director until the White House agrees to make changes to the bureau’s structure.

Republicans on the committee asked Cordray few pointed questions and focused mostly on White, and many have complimented him personally. Senator Tom Coburn, an Oklahoma Republican, said he thought Cordray had “done a wonderful job.”

But Republicans say in order to confirm someone, they want the White House to agree to replace the CFPB’s director with a bipartisan commission and change the way it is funded.

Cordray has led the CFPB in an interim position since January 2012. Obama used a procedural maneuver known as a “recess appointment” to install him temporarily and re-nominated Cordray in January.

Adding to the controversy, a U.S. appeals court ruled earlier this year that recess appointments to the National Labor Relations Board made at the same time Cordray was installed were unconstitutional because lawmakers were not technically in recess.

That ruling has raised questions about Cordray’s appointment as well.

Crapo said after the meeting that Republicans and Obama have not reached an agreement to pave the way for Cordray to be confirmed but that he thought there could be common ground.

Under Cordray’s tenure, the CFPB has worked on an overhaul of mortgage regulations. It has also taken on debt collectors and brought several enforcement actions related to credit-card add-on products.

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