After years of criticizing regulators for lax enforcement of securities law, Elizabeth Warren finally has an outspoken ally on the inside pushing for a crackdown on Wall Street offenders.
Kara Stein, the junior Democrat on the Securities and Exchange Commission, has quickly become one of its more ruthless enforcers, making trouble for Wall Street, and aligning herself with Warren’s views as part of a powerful regulator that polices the financial industry.
Stein has opposed giving free passes, or waivers, to badly behaving financial companies so that they can keep doing certain types of business as if nothing happened. Before she started dissenting, the waiver approval was often a routine formality at the SEC.
Though she may not have the Massachusetts senator’s star power or political ambition, Stein has rattled financial companies, several banking lobbyists said.
“If you have a motion for a waiver pending before the SEC, Stein is your immediate concern,” said Bradley Miller, a former House Democrat who worked on the 2010 Dodd-Frank Act and is now with Grais & Ellsworth LLP.
Even Warren (D-Mass.) told POLITICO she’s impressed with Stein’s aggressive work.
“Kara Stein has worked on securities law and reform issues for years and she really knows her stuff. I’m very pleased that her strong, independent voice is now at the SEC,” Warren said in a statement. A staffer for Stein declined to comment.
Described as a “nerd” by some who know her, Stein may not have the same pulpit that Warren commands from the Senate. But as one of the five SEC commissioners, Stein has a more direct say over Wall Street companies’ businesses.
Stein, 51, and a mother of two, drafted parts of the Dodd-Frank while working for Sen. Jack Reed (D-R.I.) on the Senate Banking Committee. She was appointed to the SEC by President Barack Obama in 2013, the same year Warren joined the Senate.
Earlier this year, she voted against the SEC’s approval of a new kind of complicated financial product, an exchange-traded fund, which she said could be too risky.
And in a recent speech, Stein questioned companies’ love affair with buy backs of shares — warning that the move might be sacrificing long-term growth for short-term gains.
As much as Warren irks big big banks, Stein’s tough stance against waivers that could give them more trouble in the near-term.
“Stein and Warren, in continuing to criticize the waivers over time, have created a debate about waivers. [SEC Chair] Mary Jo White has had to defend those publicly in a way the typically the SEC does not do,” Miller said.
Just this month, Stein blasted an SEC waiver approved for Deutsche Bank, which had agreed to pay $2.5 billion in penalties to settle criminal allegations from the government that it manipulated borrowing rates.
In public remarks two days later, she defended her work opposing waivers for companies that get into trouble.
“It should not be seen as an automatic waiver,” Stein said, speaking May 6 at a conference in Washington. “Maybe we should have time-out waivers, conditional waivers. It’s thinking outside the box again with the existing tool the commission has, which actually might have more deterrent value at the end of the day than a large penalty,” said Stein, the morning after Warren delivered a fiery speech at the same conference. “A large penalty sometimes for a large firm is sort of a speed bump,” Stein said.
Indeed, Stein has voted against waivers at least four times when they’ve come before the SEC, putting her at odds with White.
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