WASHINGTON — Senator Elizabeth Warren took aim at the country’s top Wall Street regulator Tuesday in an unusually personal and blunt letter that complained about delayed reforms and lax enforcement, prompting a full-throated defense from the White House.
In a 13-page letter to Securities and Exchange Commission chairwoman Mary Jo White, Warren cited a “significant gap” between the promises White made during her Senate confirmation hearings and her subsequent performance leading the independent commission.
“I am disappointed that you have not been the strong leader that many hoped for — and that you promised to be,” the Massachusetts Democrat wrote. “I hope you will step up to the job for which you have been confirmed.”
Warren launched her salvo as the fifth anniversary approaches this summer of passage of the landmark Dodd-Frank Wall Street reform law. Backers hoped the 2010 legislation would spell a new era of tougher regulation on financial institutions, but it still has not been fully implemented by the SEC — the reason for some of Warren’s ire.
White House spokesman Josh Earnest brushed aside Warren’s concerns Tuesday afternoon, expressing confidence in White, who the administration nominated to the position two years ago.
Speaking from the White House briefing room, Earnest said the president believes the SEC chairwoman “shares his values and the priority that he has placed on promptly implementing Wall Street reform.” He also said that President Obama “does continue to believe that she is the right person for the job.”
The split over the SEC signals the latest rift between Warren, who is a leader of the liberal wing of the Democratic Party, and the Obama administration. It also is a sign that liberals and Wall Street watchdog groups are gearing up for a major fight over two vacancies that are expected on the commission, whose members must be confirmed by the Senate.
Suspicion among liberals about White accelerated last week when she appointed a top Goldman Sachs lawyer to be her chief of staff. The left has long complained that key financial regulatory bodies are stacked with staff that have deep ties to Wall Street firms.
“Warren has expressed the frustration of many people who had high hopes for chairwoman White,” said Dennis M. Kelleher, the president of Better Markets, a nonprofit that supports market reforms. “It’s bad enough that the rule-making is so far behind. It’s inexcusable that the enforcement has been toothless.”
Kelleher’s group took heat from the left two years ago for supporting White during her Senate confirmation hearings. He and others believed that her background as a federal prosecutor in New York would outweigh her later position as a partner and cochair of the litigation department at a Manhattan law firm with finance industry clients. At the time, he called her a “tough, smart, no nonsense” prosecutor. Since then, he said, he’s witnessed two “largely unproductive years” at the SEC and he is particularly disappointed that key parts of the Dodd-Frank law have not been implemented.
White defended her tenure at the SEC in a statement. “I am very proud of the agency’s achievements under my leadership, including our record year in enforcement and the commission’s efforts,” White said.
An SEC official — who requested anonymity so as not to undercut the official statement — released a background memo outlining SEC accomplishments under White’s leadership. It notes that the commission has “proposed or adopted” 30 rules intended to protect investors and markets, brought more than 1,400 enforcement actions, and levied more than $4.1 billion in penalties.
The prosecutor-turned-Wall- Street-lawyer was nominated by Obama in January 2013 to lead the five-member commission. Obama sold her to Congress as a thick-skinned enforcer, noting that her time as a US attorney for the Southern District of New York included prosecuting terrorists.
Warren voted for White’s confirmation in committee despite reservations about her post-prosecutorial job as a defense lawyer. The Senate Committee on Banking, Housing and Urban Affairs approved her 21-to-1, with the lone dissenting vote coming from Senator Sherrod Brown of Ohio. White’s nomination then sailed through the Senate in April 2013.
Relations between Warren and White reached a boiling point last month when the two met to discuss a long-delayed rule on chief executive pay. The rule would require public companies to disclose compensation for chief executives, the median pay for their workers, and the ratio between the two. It was supposed to be completed 21 months ago but has been postponed several times.
During the May 21 meeting, White pledged that the rule would be complete by fall 2015, according to Warren’s account. Yet hours after the two met, Warren saw documentation from the Office of Management and Budget showing the rule wouldn’t actually be done until April 2016.
“I am perplexed as to why you told me personally that the rule would be completed by the fall of 2015 when it appears that you were or should have been aware of additional delays,” Warren wrote.
White, in her statement, said Warren’s “mischaracterization” about the meeting is “unfortunate” but “will not detract from the work we have done, and will continue to do, on behalf of investors.”
The commission remains committed to finishing the rule by fall 2015, according to an SEC official.
Warren, in her letter, also complained that the SEC has not required companies to admit wrongdoing often enough when the agency finds they violate the law. White repeatedly promised during her nomination proceedings that she would require such admissions.
Between June 2013 and September 2014, the SEC made 520 settlements and required admission of guilt in only 19 cases, Warren wrote.
Before White’s tenure, the SEC had not ever required a guilty admission, the SEC official said.
Warren also wants White to stop providing companies that have broken the law with valuable waivers that allow them to bypass some SEC reviews.
In addition, Warren seeks to have the SEC require companies to disclose their campaign spending so that shareholders can determine whether a company’s political donations are, in fact, helping the firm’s bottom line.
Warren also noted that White has had to recuse herself from a number of enforcement investigations due to her husband’s job. John White is a partner at the law firm Cravath, Swaine & Moore and the chairman of its corporate governance practice.