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SEC Chief Mary Schapiro Steps Down, Elisse Walter Steps In

Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, announced she will step down Dec. 14 following a strenuous four years as SEC chief.

Schapiro was appointed head of the SEC by U.S. President Barack Obama in 2008, just one month after the Bernie Madoff scandal emerged, and she officially took office in 2009 at the peak of the financial crisis.

Her departure was not a surprise, as over the past year she had told fellow staff members how exhausted she was and that she hoped to leave after the elections.

Schapiro was the first woman to be permanent chairman of the SEC, and her four years were arguably the toughest stretch any SEC chief has faced.

"When Mary agreed to serve nearly four years ago, she was fully aware of the difficulties facing the SEC and our economy as a whole," President Obama said in a statement. "But she accepted the challenge, and today, the SEC is stronger and our financial system is safer and better able to serve the American people – thanks in large part to Mary's hard work."

SEC Chief Schapiro Survives Rough Four Years

When Schapiro was appointed SEC chief, the country was grappling with the worst financial crisis since the Great Depression and there was thought that the SEC could be abolished.

The Lehman Brothers bankruptcy was the largest bankruptcy ever filed in the U.S. and its aftermath was just the first of many obstacles Schapiro faced. The revelation of Madoff's infamous Ponzi scheme just weeks before she took office also seriously jeopardized America's confidence in the SEC.

Schapiro subsequently attempted to overhaul the SEC, introducing the Dodd-Frank Act in 2010 and spearheading a record number of civil cases against Wall Street's largest financial institutions.

Goldman Sachs Group Inc. (NYSE: GS) in July 2010 agreed to pay $550 million, the largest settlement the SEC has ever reached with a financial institution, because of the fraud committed when Goldman sold investors a mortgage security without disclosing that hedge fund Paulson & Co. helped pick the loans and bet against them.

Rajat Gupta, former Goldman partner, was sentenced to two years of prison for insider trading and just last week the SEC filed a lawsuit against what is thought to be the largest insider trading scheme ever.

Some critics argue that the SEC's regulations have gone too far and are now hindering markets, while others say not enough has been done to curtail risky behavior.

But perhaps the biggest critique of Schapiro's tenure is the fact that top individuals at the largest banks and financial firms were not prosecuted criminally for their roles in the financial crisis.

The $550 million Goldman shelled out amounted to about two weeks in earnings and Goldman, along with other large banks that have settled fraudulent charges, never had to admit to or deny any wrongdoing.

And the fact that Jon Corzine is not locked up after losing close to $2 billion worth of customer's money is enough to make any American sick.

High-frequency and electronic trading were another element that the SEC struggled with during Schapiro's term. The May 2010 "Flash Crash" resulted in a 20-minute plunge in stock prices that temporarily erased $862 billion of market value.

Schapiro has since supervised adjustments of trading practices and set the stage for a future computer surveillance system.

Whether you believe there is now too much financial regulation or too little action taking place, Schapiro will be remembered for guiding the SEC through one of the country's darkest financial hours.

"The S.E.C. came back from the brink," Harvey L. Pitt, a former chairman of the agency under President George W. Bush told The New York Times. "I give her enormous credit for that."

The New SEC Chief

Elisse Walter, an SEC commissioner, will replace Schapiro as SEC chairman for the foreseeable future. Walter is also a former senior executive vice president at the Financial Industry Regulatory Authority.

Walter will have to figure out how to navigate through the Dodd-Frank overhaul, as the agency has implemented three-quarters of all the rules required by the extensive law.

Dealing with possibly further regulation, as well as high-frequency trading, and bringing investor confidence back to a shaken market are among the challenges Walter and the SEC now face.

It's still unclear if Walter will be the permanent new SEC chief or a temporary replacement.

President Obama said he was "coonfident that Elisse's years of experience will serve her well in her new position."

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