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Should You Be Concerned About Obama's New SEC Chairman Pick?

"You don't want to mess with Mary Jo."

She put legendary mob boss John Gotti (i.e. the “Dapper Don”) behind bars, she prosecuted Omar “The Blink Sheikh” Abdel Rahman, and her office in 1998 indicted Osama bin-Laden for attacking U.S. embassies.

An unholy trinity (L to R): John Gotti, “The Blink Sheikh,” & Osama bin-Laden. (Getty Images).

Now ex-federal prosecutor Mary Jo White has a different kind of assignment: Keep high finance under control as the new head of the Securities and Exchange Commission (SEC).

If confirmed, White would have the duty of enforcing and fine-tuning the Dodd–Frank Wall Street Reform and Consumer Protection Act.

"You don't want to mess with Mary Jo," President Obama said last week with White at his side. "As one former SEC chairman said, Mary Jo does not intimidate easily, and that's important because she's got a big job ahead of her."

White would replace Elisse Walter, who has been acting as interim chairwoman since former director Mary Schapiro’s resignation in December.

President Barack Obama announces in the State Dining Room of the White House in Washington, Jan. 24, 2013, that he will nominate Mary Jo White, right, to lead the Security and Exchange Commission (SEC), and re-nominate Richard Cordray, left, to lead the Consumer Financial Protection Bureau, a role that he has held for the last year under a recess appointment. (Alex Wong/Getty Images).

However, although White has a reputation for being “tough, no-nonsense and fiercely competitive,” as the Associated Press puts it, there are a few things U.S. Senators may want to consider during her confirmation hearings.

First, there are concerns about her connections to Wall Street heavyweights (i.e. the people she would be regulating).

From the Wall Street Journal (emphases added):

Ms. White has spent the past decade as a leading white-collar defense lawyer at Debevoise & Plimpton. Her husband John White is a partner at law firm Cravath Swaine & Moore LLP.

Gary Aguirre, a former SEC investigator and whistleblower who has sparred with Ms. White in the past, said she has been "Wall Street's protector-in-chief" for the past few years.

As head of the SEC, ethics rules would likely bar Ms. White for two years from working on certain matters—including enforcement actions—that directly affect Debevoise, her clients from the past two years or any of her husband's clients that he is representing before the agency.

"She'd have to recuse all over the place" from SEC votes on policy and enforcement, according to one lawyer who knows her well. Ms. White didn't respond to a request for comment.

An SEC spokesman says she would sign before confirmation "an ethics agreement that includes recusals based on laws and the Obama ethics pledge." She also will consult with the SEC's ethics office on any other potential recusal issues that arise, the spokesman adds.

Of course, some see her familiarity with Wall Street as a major plus.

“[Her] experience isn’t necessarily a negative. Franklin Delano Roosevelt made Joseph Kennedy the first SEC chairman after its creation in 1934, supposedly reasoning that the financier would know how to police markets that were perceived as crooked,” writes Josh Boak for the Financial Times.

“White would be the first prosecutor to head the SEC and, despite her links to banks and bankers, her selection is widely seen as a signal that the administration is looking to take a tougher stance on Wall Street misbehavior,” he adds.

Mary Jo White pictured at a press conference in 2011, when she was U.S. Attorney for the southern district of New York. (Getty Images).

Likewise, Glenn Colton, who worked as a prosecutor for White and currently leads the white-collar practice at law firm SNR Denton, told the WSJ that her connections "can only aid her ability to do what government is supposed to do, which is to consider all sides of an issue."

Second, there are questions regarding whether she is qualified for the job.

“Her background is in litigation -- as a prosecutor and defense lawyer -- rather than as an administrator or policymaker. This presents the danger that she may see maximizing jail terms rather than expanding wealth creation as her goal,” James Gattuso writes for the Heritage Foundation. (Emphasis added)

But he also notes that this could be an asset.

“Alternatively, her litigation background could be an advantage-- if it leads to focus on prosecuting actual crimes (think Bernie Madoff) rather than expanding regulation. These are questions that should be explored by Senators as they consider confirmation of White to this position,” he adds.

Mary Jo White (AP Photo/Cliff Owen)

Whatever the case, if confirmed, White vows to work to "fulfill the agency's mission to protect investors and to ensure the strength, efficiency and the transparency of our capital markets."

"The SEC, long a vital and positive force for the markets, has a lot of hard and important work ahead of it," she said.

Final Thought (via Forbes’ John Wasik):

Anyone who put the “Dapper Don” John Gotti in jail, beat Trump and convicted terrorists is off and running for a job that involves policing the thieves’ den known as high finance. She might have to bone up on structured products, derivatives and high-frequency trading to get the lay of the land, though. It’s a steep learning curve, but one that she might relish.

Follow Becket Adams (@BecketAdams) on Twitter

Featured image courtesy Getty Images.

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