June 17, 2009 photo shows, from left: Comptroller of the Currency John C. Dugan; Mary Shapiro of the Securities and Exchange Commission; Secretary of the Treasury Timothy Geithner and President Obama.

Richard Perry, New York Times

SEC chairwoman behind overhaul is stepping down

  • New York Times
  • November 26, 2012 - 11:39 PM


Mary Schapiro spent four years at the Securities and Exchange Commission trying to shake the regulator's past.

In one of the countless grillings she faced, Schapiro was slammed at a congressional hearing in 2010 for missing the signs of Bernard Madoff's Ponzi scheme, a fraud that took place under her predecessors.

But the SEC chairwoman was ready. As always, she came to Capitol Hill armed with three copies of her testimony and a stack of handwritten note cards, reminders that included details of the agency's overhaul efforts.

"Coming to an agency that was in dire straits, this level of preparation was needed to force all of us to be on top of our issues," Schapiro, 57, said in a recent interview.

As her bruising tenure came to its end, Schapiro, who stepped down Monday, leaves behind a stronger SEC.

While the agency still faces its share of challenges, Schapiro, the first woman to hold the top spot full time, has revamped the management ranks, revived the enforcement unit and secured more funding from a budget-conscious Congress.

A self-described pragmatist, she also has won over critics and embraced a cautious style that made her a steady hand during periods of tumult, like the May 2010 stock market flash crash.

Still, the makeover is not complete.

The agency must now grapple with the increasingly complex products and rapid-fire trading that dominate Wall Street. Schapiro's conservative nature has also drawn fire from consumer advocates, who were hoping for a louder voice more critical of the financial industry. She was slow, they argue, to combat a new law that loosened investor protections and has trailed other regulators in writing rules for Wall Street.

"At a time when we needed an aggressive chairman of the SEC, I saw someone who was not pushing back," said Bart Naylor, an analyst at Public Citizen, a consumer advocacy group.

On Monday, President Obama named Elisse Walter, a Democrat who became an SEC commissioner in 2008, the new chairwoman. Walter, a longtime ally of Schapiro, is expected to carry out a similar agenda. In a somewhat surprising move, Walter will take over the top spot, rather than stepping into an interim post.

The White House is expected to nominate another agency chief in the near future, said a person briefed on the matter.

In 2008, Schapiro inherited a mess at the SEC. Schapiro, a lifelong regulator who previously ran the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority, quickly gained a reputation as a consensus-builder determined to repair the agency's reputation.

"The SEC came back from the brink," said Harvey Pitt, a former chairman of the agency under President George W. Bush. "I give her enormous credit for that."

Critics contended that Cristopher Cox, Schapiro's predecessor, left an agency with low morale that was ill-prepared to cope with the financial crisis. An early plan by the Obama administration called for the SEC to be broken up into several agencies. At a staff meeting in 2009, she warned that "everyone needs to work harder or this agency could become extinct." She also circulated letters from Madoff's victims.

"We had never been spoken to like that before, and it was exactly what we needed," said Thomas Sporkin, a former enforcement official at the SEC.

Her consensus-driven approach has constrained the agency's efforts, some contend. Other regulators have outpaced the SEC's rule writing under the Dodd-Frank Act, the crackdown passed in response to the crisis. Schapiro notes that Dodd-Frank forced the SEC to adopt more rules than any other agency.

Consumer advocates and other critics also say she failed to grab the bully pulpit at a time the country needed a vocal critic of Wall Street. Since the financial crisis, the agency brought few enforcement cases against the Wall Street executives at the center of the crisis.

The SEC notes that it has brought a record number of cases over the past two years. While no top banking executives have been charged, the agency has filed actions against 129 people and firms tied to the crisis.

© 2018 Star Tribune