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".

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Guru Careers: Financial Director / FD / Senior Finance Manager

Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen