Sen. Elizabeth Warren (D-Mass.) labeled one of President Obama’s top financial cops a failure Tuesday, issuing a broadside against the Securities and Exchange Commission.
In a detailed 13-page letter, Warren effectively declared Mary Jo White’s entire tenure as chairwoman of the SEC a missed opportunity, urging her to drastically change course.
Calling her two-year stint leading the agency “extremely disappointing,” the freshman senator accused White of breaking promises she made during the confirmation process, of taking a soft approach toward regulating the financial sector and even of lying to Warren directly.
“I am disappointed that you have not been the strong leader that many hoped for — and that you promised to be,” said Warren. “I hope that you will step up to the job for which you have been confirmed.”
The former Harvard law professor taking a major player in the financial sector to task is nothing new. From her committee position on the Senate Banking Committee, she has racked up millions of views on YouTube for her grilling of industry officials, as well as the regulators charged with monitoring them.
But her letter to White marked one of the most vigorous challenges to a top official of her career, especially considering it was aimed squarely at a regulator nominated by Obama and who received unanimous backing from the Senate — including from Warren herself.
Ohio Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, was the only member to vote against White at the committee level when she was nominated, arguing she was too close to Wall Street. Following Warren’s letter, Brown declined to pile on.
“I think she’s doing her best. I don’t agree with her on every case, but I think by and large she’s doing her best,” he told The Hill Tuesday.
Warren’s missive led the White House to defend White’s time at the SEC.
“The president does continue to believe she is the right person for the job,” press secretary Josh Earnest told reporters. “The president does continue to believe that the reasons he chose her, based on her experience and her values, continue to be important today.”
Warren has long griped that financial regulators treat Wall Street with kid gloves, and many of the complaints detailed in her latest letter have been aired elsewhere.
But the catalyst for such a detailed takedown of White’s tenure appears to have been a private May 21 meeting, where Warren believes the SEC chief deliberately misled her about a long-delayed rules project.
Warren and many on the left have been eager for the SEC to write rules implementing a provision of the Dodd-Frank Wall Street reform law requiring companies to disclose how much more money a CEO makes compared to an average employee. With economic inequality emerging as major political rallying point among Democrats, proponents of the provision argue it would lead to some much-needed public shaming of outsize executive paychecks.
But the rule-making process has been bogged down at the SEC, where the project has stalled for several years. At the May meeting, Warren says White told her the rules would be done in “the next month or two,” or certainly by the fall.
Later that day, the Office of Management and Budget (OMB) published its overall regulatory update, listing that project’s completion date as April 2016. Warren saw the discrepancy as “misinformation” from White.
“I cannot understand how and why this rule has been delayed for so long, and I am perplexed as to why you told me personally that the rule would be completed by the fall of 2015 when it appears you were or should have been aware of additional delays,” Warren wrote.
An SEC official said Tuesday the agency is still committed to that fall timeframe despite the OMB document.
Nonetheless, weeks after that meeting, Warren was out with a letter dissecting White’s stint at the agency and accusing the former federal prosecutor and white-collar defense attorney of talking a big game but coming up short.
“During this confirmation hearing and in the period immediately after, you also made promises to members of the Senate,” she wrote. “You appear to have broken those promises.”
Warren laid out four main failures by White.
In addition to moving slowly on the CEO pay rule, Warren blasted White for failing to require more companies and individuals to admit guilt when settling charges stemming from SEC investigations.
Prior to White, the SEC never pushed for admissions of wrongdoing when striking settlements. But while White instituted the policy after taking the reins, Warren argued the tool was gathering dust. She claimed that of the 520 settlements the SEC has reached under White, only 19 required admissions of guilt. In addition, 11 of those 19 did not require companies to agree to specific violations of the law, but rather broad statements of fact.
Furthermore, she took issue with the SEC’s practice of routinely granting waivers to financial firms that otherwise would be barred from some market activities. Under securities law, companies that plead guilty to criminal charges can be barred from some market roles, but the SEC regularly grants waivers to large institutions to allow them to continue on as before.
The regularity of those waivers has led to criticism from within the agency itself; SEC Commissioner Kara Stein disagreed with a recent waiver decision for several banks that pleaded guilty to manipulating foreign currency markets.
And finally, Warren accused White of being effectively invisible as a regulator on some critical cases.
Before joining the SEC, White was a powerhouse defense attorney who represented some of the biggest names in finance. But that previous work has complicated her time at the SEC, because she has had to recuse herself from some agency work. Further complicating matters is the fact that her husband remains a powerful attorney, forcing White to step away from additional SEC matters.
With the other four voting commissioners at the SEC split between Republicans and Democrats, a recused White can mean a deadlocked regulator.
Warren said she was worried about those conflicts when White was nominated, but was told it would be a “minimal disruption.”
“This does not appear to be the case,” Warren wrote Tuesday.
The Massachusetts Democrat stopped short of calling for White to step down, but said she hoped her detailed list of grievances would convince White to fulfill the promises she made during her confirmation.
In response to Warren’s claims, White fired back, saying in a statement that the senator’s “mischaracterizations” of the SEC’s work on her watch was off-base.
“I am very proud of the agency’s achievements under my leadership, including our record year in enforcement,” said White.
In fiscal 2014, the SEC brought a record 755 enforcement actions on financial firms and individuals, resulting in penalties and disgorgement of more than $4 billion.
But the agency has come under fire from the left over many of Warren’s gripes, and liberals are pushing hard for the SEC to fill upcoming commissioner slots with individuals that will bring the hammer down on Wall Street.
—Jordan Fabian and Kevin Cirilli contributed.
— Updated at 7:20 p.m.