The White House, in announcing the departure of Mary Schapiro as Chairwoman of the SEC, also took the unusual step of “designating” her replacement – a way to fill the vacancy at the top of the commission without confirmation in the Senate. Elisse Walter, a current commissioner, will replace Schapiro. Here’s the announcement:
President Obama said, “I want to express my deep gratitude to Mary Schapiro for her steadfast leadership at the Securities and Exchange Commission. When Mary agreed to serve nearly four years ago, she was fully aware of the difficulties facing the SEC and our economy as a whole. But she accepted the challenge, and today, the SEC is stronger and our financial system is safer and better able to serve the American people – thanks in large part to Mary’s hard work.
“I am also pleased to designate Elisse Walter as SEC Chairman after Mary’s departure. I’m confident that Elisse’s years of experience will serve her well in her new position, and I’m grateful she has agreed to help lead the agency.”
“Designate” is a new word in this context. Usually, you nominate someone to fill a vacancy of this type, subject to advise and consent by the Senate. But here, the White House basically elevated Walter to the Chair position, not as an acting chair but as the actual chair. This leaves a vacancy on the five-member commission, which could lead to immediate problems. But it’s much easier to get a commissioner confirmed than the Chair.
In addition, Walter’s own term ends at the end of 2013, so this becomes a short-term assignment. Walter could get re-nominated at that time, but that would require confirmation.
Walter is a career regulator who returned to the SEC in 2008 – appointed as a Democratic commissioner by George W. Bush – after a stint at the Financial Industry Regulatory Authority (FINRA). She’s been generally in line with Schapiro in her votes as an SEC commissioner. Schapiro’s husband, Ronald Stern, is a Vice President and Senior Competition Counsel with General Electric, a major financial entity through its subsidiary GE Capital.
So what this looks like to me is a politically expedient way to keep someone in the Chair position without having to go through Congress. The White House could decide to keep Walter in that spot, or nominate a replacement. But Walter retains the full regulatory authority of the office in the meantime. This is how we operate in Washington in an era of a broken Senate, where normal Presidential appointments cannot get through obstruction. So the executive branch uses questionable moves to short-circuit legislative authority, aggrandize Presidential power, as a counterpoint. This is why the most important vote of the next couple years comes in January, when the Senate decides whether or not to really change their own rules and make it a majoritarian institution, or whether it goes for a cosmetic change.
I don’t see just end-running the Senate and keeping things pat as tenable, however. You’ll have a situation with an equal number of Democrats and Republicans on the commission, a recipe for gridlock. This could be the very GOAL of those who don’t want any aggressiveness out of the SEC, but it’s not really tenable to keep the main securities regulator as a non-functioning body. So the White House will have to either nominate another commissioner, or another chair.
They should be pushed to nominate another chair, someone with the proper background and prosecutorial mien to turn the SEC into an actual enforcer again. CREDO has a petition seeking such a resolution, with a legitimate regulator in the position like a Sheila Bair or a Neil Barofsky. It’s a long shot, maybe an impossible shot, but it at least SHOULD BE the next step.