Can Barack Obama finally rein in Wall Street with his latest reforms?

Obama's attempts to get tough on regulation could be hampered by his new appointees' links to the industry

At first glance, Mary Jo White, US President Barack Obama's choice to be the next head of the Securities and Exchange Commission (SEC), the market watchdog, appears to have the makings of a tough regulator. The first woman to serve as US Attorney for the Southern District of New York, she came to prominence with a string of high-profile prosecutions, covering terrorism, money-laundering and Mafia crime. She went after John Gotti and pursued four followers of Osama bin Laden for the 1998 bombings of US embassies in Africa. As the President put it last month, "You don't want to mess with Mary Jo."

Except that many on Wall Street might not have to mess with her at all, at least to begin with. For the past decade, after leaving public office, Ms White has been a partner and head of litigation at Debevoise & Plimpton, a major law firm, where her clients have included JP Morgan Chase and UBS.

She has also represented Wall Street bigwigs such as Ken Lewis, the ex-Bank of America chief, John Mack, who once held the top job at Morgan Stanley, and Rajat Gupta, the former McKinsey chief and Goldman Sachs board member who has been convicted of insider trading.

Meanwhile, although she will retire from Debevoise, she is entitled to payments from the law firm totalling $500,000 (£320,000) a year. Within 60 days of her appointment as SEC chief, if she is confirmed by the Senate, the firm will make a lump-sum payment covering the next four years.

The result: she is going have to take care to avoid conflicts of interest. For a year after retiring from Debevoise, she won't participate in matters to do with the firm, or with former clients, without seeking authorisation. She will also have to take care in matters related to her husband's law firm, Cravath, Swaine & Moore, another major outfit.

The potential conflicts have cast a cloud over hopes that President Obama's second term might herald a change in the administration's approach to Wall Street. In Obama's first term, despite numerous speeches and calls for action by the President and other top officials, little changed in the portals of high finance.

Some financial reforms, notably the Dodd-Frank laws, were passed. But, as a recent investigation by the PBS Frontline programme showed, not one senior executive has been put on trial for fraud, nor have big institutions faced any meaningful civil actions, while a number of key structural issues identified in the wake of the crash, particularly on the issue of institutions that are too big to fail, remain unresolved.

On Thursday, Elizabeth Warren, the newly elected Democratic Senator from Massachusetts and long-time critic of Wall Street's misdeeds, underscored the problem when she grilled a group of regulators, including the outgoing head of the SEC and representatives of the Federal Reserve and the Commodities Futures Trading Commission, on their oversight activities.

"The question I really want to ask is about how tough you are – about how much leverage you really have," Ms Warren, a one-time law professor, asked the supposedly powerful regulators.

"Tell me a little bit about the last few times you've taken the biggest financial institutions on Wall Street all the way to trial." The question elicited some applause from the audience – but, initially, only silence from the assembled regulators, leading Ms Warren to ask, "Anybody?"

The second term, it was hoped, would usher in a change. Freed from running for office ever again, President Obama could finally go after Wall Street which, based on campaign donation figures, showed a preference for Mitt Romney in the last election cycle. That was a reversal from 2008, when it backed Mr Obama.

Something did indeed appear to have shifted when the Justice Department finally decided to pursue a civil case against Standard & Poor's, the ratings agency which, like others in that business, is accused of failing to properly rate mortgage securities in the run up to the crash.

But the President's choice for SEC chief does little to inspire confidence. And then last week, questions were raised about Jack Lew, the man Obama picked to succeed Tim Geithner at the Treasury.

Mr Lew, is a long-time Democratic operative, having served as budget director for Presidents Clinton and Obama, and then as the latter's chief of staff.

But he is also a recent Wall Street hand. Although no veteran – his experience extended to just two years – he was there between 2006 and 2008, as the financial crisis erupted. His employer was Citigroup, which was forced to seek government help after being brought to its knees by the crisis.

At the time, in 2008, he was the chief operating officer of Citi's Alternative Investments arm, which managed many billions in private equity and hedge-fund investments.

At his confirmation hearing, he insisted that he did not make investment decisions. But in his new job, among his many responsibilities will be pushing through the so-called Volcker Rule to clamp down on risky banking activities – not unlike the ones engaged in by his Citigroup division. That, as Republican Senator Orrin Hatch said at the hearings, could be "awkward". As chair of the Financial Stability Board, a position that comes with his new job, he would thus be telling Wall Street: "Do as I say, not as I did."

Beyond structural regulation, there is also the question of executive pay. President Obama has often lamented the rewards banked by bosses of failing business. The problem is particularly severe in the finance world, where many people got away with hefty payouts despite the crisis.

Which brings us to Mr Lew. On January 15 2009, after the Citigroup bailout and federal guarantees, Mr Lew, who had just left the bank and was heading to the newly installed Obama government, was paid nearly $1m for to cover his salary, "discretionary cash compensation" and other work in 2008.

When asked about it during the hearings, his response was no different to the arguments that bankers often make when grilled on pay. He was, he said, "compensated in the manner consistent with the other people who did the kind of work that I did".

Disappointingly for those hoping that the administration might finally rein in Wall Street in the coming four years, he added that the rights and wrongs of it were "for others to judge".

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