SEC Needs Krawcheck, Not a Caretaker
(Corrects spelling of Sallie A. Krawcheck in the headline.)
Mary Schapiro, chairman of the U.S. Securities and Exchange Commission since 2009, said today she plans to leave the agency as of Dec. 14. President Barack Obama quickly named SEC Commissioner Elisse Walter, Schapiro's colleague from their days overseeing brokers at the Financial Industry Regulatory Authority, as chairman. Since Walter already has been confirmed as a commissioner, she won't need to be reconfirmed as the chairman, allowing the president to sidestep a fight with Senate Republicans until her term expires at the end of 2013.
Nothing against Walter, but the SEC needs someone else at the helm. It needs a more forceful, innovative, high-profile leader to complete the writing of the Dodd-Frank regulations. It also needs someone willing to revive the agency's role as an aggressive monitor of markets, public company financial statements and fund management disclosures on behalf of investors. It doesn't need a caretaker, which is how Walter would be viewed once she takes the helm.
One intriguing name that has popped up just might fit the bill: Sallie A. Krawcheck. She has been out of the public eye since late 2011, when she was pushed from her perch as head of Bank of America Merrill Lynch's wealth management unit. Since then, Krawcheck has been taking some interesting positions in op-eds, magazine articles and more than 700 tweets -- almost always against the Wall Street grain.
She is proposing, for example, that money market mutual funds be required to let their net asset values float, rather than pretend that a share is always worth $1, even if the underlying assets are worth less. She favors tough bank stress tests and more aggressive corporate governance. She recommends compensating bank executives in part with their own bonds to increase their aversion to risk and decrease their love of leverage. She also favors tying bank dividends to earnings as a way of maintaining capital in a downturn. These positions put her smack in the middle of the Obama administration's philosophy on financial regulation.
Until she left Bank of America, Krawcheck, 47, was usually described as the most senior woman on Wall Street. Magazines doted on her, often naming her one of the "world's most powerful women." But her influence waned after the 2008 financial crisis. One reason: As head of Citigroup Global Wealth Management, she proposed that the company make good on a portion of clients' losses on investments that had been sold to them as low-risk.
She won the argument but lost the support of bank officers, including then-CEO Vikram Pandit. In my book, that makes her a solid candidate for SEC chairman, whose No. 1 job is to protect the interests of investors, not of the industry. Democrats are likely to view her as yet another Wall Street insider who failed to prevent the financial meltdown. Before they draw any conclusions, they should check out Krawcheck.
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