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Mark Schoeff Jr. looks at what's really happening on Capitol Hill - and the upshot for advisers.

Ex-SEC watchdog sees no problem with White's CV

Background as both prosecutor and defense attorney for Wall Steet a good thing, Kotz says

Feb 1, 2013 @ 2:31 pm

By Mark Schoeff Jr.

When it comes to cracking down on Wall Street, Mary Jo White has played both ends and the middle.

As U.S. Attorney for the Southern District of New York, she gained acclaim for prosecuting white-collar crimes. As the head of the litigation department at Debevoise & Plimpton LLP, she defended Wall Street firms, such as JPMorgan Chase & Co. and Morgan Stanley, and Wall Street titans, such as former Bank of America Merrill Lynch chief executive Ken Lewis.

If she is confirmed by the Senate as the next chairman of the Securities and Exchange Commission, she will be walking through the revolving door.

The twirl should not disqualify her from the position, according to a former SEC watchdog.

“I don't anticipate it will derail things,” said H. David Kotz, a director at Berkeley Research Group and the SEC inspector general from 2007-12.

Mr. Kotz was a tough monitor at the SEC. He had members of the staff talking to themselves after some of his unsparing internal reviews. But he expressed sympathy toward SEC staffers who have come from Wall Street or might want to move to Wall Street in their next career step.

“If you cut people off from representing the other side, you'll never get anyone to go to the SEC,” Mr. Kotz said. “It's a difficult situation. If you're careful with recusals, it can be managed.”

Ms. White's potential conflicts of interest and those of her husband John, a former director of the SEC Division of Corporate Finance and currently a partner at Cravath Swaine & Moore LLP, are not likely to stir up much political backlash. “It's bad but it would have to get much worse to sink her nomination,” Mark Calabria, director of financial services regulatory studies at the Cato Institute, said of her conflicts.

As a practical political matter, Democrats are most likely to have a problem with Ms. White working so aggressively and effectively to defend Wall Street clients. But Democratic senators would be reluctant to oppose a nominee in whom President Barack Obama has invested his political capital.

Republicans, on the other hand, are likely pleased that Ms. White has experience on both sides of the Wall Street fence. They are probably reassured that she has a firsthand understanding of the pressures that financial executives are under and the costs incurred from defending themselves against the SEC.

The other factors in Ms. White's favor are that she has a sterling reputation as a lawyer and U.S. attorney and has not, as far as I can tell, developed sworn enemies. Most observers say that her nomination will not generate controversy.

“She'll be confirmed quickly, once the schedule is set,” Mr. Kotz said.

Even though the politics of her confirmation could go smoothly, that doesn't mean she'll have a honeymoon with Congress. Her predecessor as chairman, Mary Schapiro, was hauled up to Capitol Hill to testify dozens of times – often by Republicans who were upset with the agency.

Trying to assuage angry legislators is a skill that Ms. White may not have acquired during her legal career.

“The political system in D.C. is different than in New York,” Mr. Kotz said.

Ms. White might want to take note of how Ms. Schapiro kept the Hill's growling to a low roar.

“Mary Schapiro did an excellent job in appearing before Congress,” Mr. Kotz said. “She did a very good job of disarming folks who were critical. She knew what to say and how to say it. She was genuine.”

That kind of political skill is something that Ms. White may have to learn on the job.

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