President-elect Barack Obama named seasoned regulator Mary Schapiro to head the Securities and Exchange Commission Thursday.
The appointment comes as Obama considers a major overhaul of the heavily criticized agency. The SEC, created after the 1929 stock market crash to police markets and restore investor confidence, has come under fire after the Wall Street meltdown and financial scandals exposed lapses in its oversight.
“We have been asleep at the switch,” Obama said during a news conference Thursday, speaking about the current U.S. financial regulatory system.
The collapses of investment firms Bear Stearns and Lehman Brothers prompted scathing criticism from lawmakers who said the agency, charged with monitoring publicly traded firms, should have flagged the problems earlier.
Criticism has intensified with the $50 billion investment fraud — one of the biggest in history — allegedly carried out over many years by Bernard Madoff.
Obama also named Georgetown University law professor Daniel Tarullo to fill one of two vacancies on the seven-seat Federal Reserve Board, which is battling to ease a credit crisis and fend off a deepening recession, and he picked former Treasury official Gary Gensler to head the Commodities Futures Trading Commission (CFTC), which regulates the U.S. commodity futures and options market.
Schapiro is now chief executive of the Financial Industry Regulatory Authority, a self-regulatory body for the securities industry. She served as an SEC commissioner for six years, and then became chairwoman of the CFTC in 1994 during the Clinton administration.
Schapiro, a lawyer, is a member of the board of directors of Duke Energy Corp and Kraft Foods Inc.
If confirmed by the Senate, Schapiro would replace SEC Chairman Christopher Cox, a Republican appointed by President George W. Bush.
The SEC announcement comes as Obama, who takes office on January 20, aims to complete most of his Cabinet picks by the end of the week. He is due to leave on Saturday for a vacation in Hawaii with his family.
Obama is also finalizing his choice for transportation secretary. Democrats say he has offered the job to Ray LaHood, a Republican congressman who has a rapport with the Democratic president-elect and hails from Obama’s home state of Illinois.
An announcement on LaHood could come on Friday.
Broad changes
By naming his pick at this time for the SEC job — which is not part of the Cabinet — Obama is signaling an interest in restoring the SEC’s stature.
Obama has called for a broad changes in Wall Street regulations to prevent future crises and has said the structure of regulatory agencies is among the issues that should be considered. But he has not spelled out any specifics.
Under one scenario backed by some lawmakers, the SEC would be merged with the CFTC, which oversees the markets for commodities such as oil, coffee and sugar.
On Wednesday, Cox said he was concerned about the SEC’s handling of the Madoff case.
Madoff’s activities were flagged at least as early as 1999 and repeatedly brought to the attention of SEC staff, who never recommended that commissioners take action.
Cox has come in for plenty of blame for the SEC’s problems but critics also say its enforcement and oversight abilities have been badly hampered by budget cuts.
Darren Robbins, a partner at San Diego-based law firm Coughlin Stoia Geller Rudman & Robbins, said Obama’s choice of Schapiro was a “good first step” toward reviving market confidence.
“Obama has a very difficult task, given the state of the financial markets, selecting someone who is more fixated on strong enforcement and on reversing the rollback of the last administration,” said Robbins, whose law office won $8 billion on behalf of investors in failed energy firm Enron.
“She (Schapiro) is someone who I think will be well received by investors and the public at large.”
