Mary Jo White and the SEC: The right woman at the wrong time

January 25, 2013, 1:42 AM UTC
SEC nominee Mary Jo White

FORTUNE — Mary Jo White, President Obama’s nominee to be the next head of the Securities and Exchange Commission, is certainly a great choice for the SEC. The question is whether she is the right pick for the rest of us.

There clearly remains a perception issue that the SEC is weak on Wall Street crime that needs to be fixed. Mary Schapiro, appointed by Obama in 2009, was supposed to correct that. But she didn’t quite get the job done. Yes, there was the $550 million fine against Goldman Sachs (GS) for constructing the ill-fated mortgage bond Abacus, and similar ones with Citigroup (C) and JPMorgan Chase (JPM). And the SEC got Countrywide’s Angelo Mozilo to personally pay a $22.5 million fine, the largest by an individual in history.

But those were the exceptions. No executives were ever charged at Lehman Brothers or AIG (AIG). Judge Jed Radkoff bashed the SEC for its policy of allowing banks to get off with slaps on the wrist. And there was the Rolling Stone tale by Matt Taibbi of the SEC lawyer who said the SEC was covering up corporate crime.

MORE: How Goldman Sachs beat the Volcker rule

White should be able to reinstate the SEC’s image as a tough regulator. As United States attorney in New York, she pursued mob boss John Gotti and terrorists. She reportedly refused to sign off on President Clinton’s pardon of oil trader Mark Rich, and briefly investigated it. What’s more, KBW’s Brian Gardner, who heads up the firm’s Washington research, says White in the past has taken a limited view of what crimes corporations could be charged with. Meaning White is less likely to allow large corporations to swallow the blame for misconduct that could only have been committed by individuals. “We expect the SEC’s investigations to become more aggressive but, at the same time, more thorough,” Gradner wrote in a note to clients.

But is that what we really need at the SEC right now? The window for pursing crimes from the financial crisis is rapidly closing. And enforcement is only one part of what the SEC does. It also needs to regulate the market to make sure it’s fair for everyone. High-frequency traders, for example, can probably breathe a sigh of relief, for now. Shapiro had been examining their turf, but this is not an area in which White has a lot of experience.

What we need now, it seems, is someone who can lay down the rules, still not finalized from Dodd-Frank, that will not just hopefully limit Wall Street malfeasance but its propensity for stupidity as well.

Typically, SEC chairmen have either come from the ranks of regulators or from Wall Street itself. White has spent the past decade at Debevoise & Plimpton. She defended Ken Lewis against allegations that he misled investors in the acquisition of Merrill Lynch when he was head of Bank of America. And she was part of the legal team that defended former Goldman board member Rajat Gupta against insider trading charges. She has worked for JPMorgan and the board of Morgan Stanley. (On another note, White also defended Fortune’s parent company, Time Warner, in a suit filed by Donald Trump over a book it published, TrumpNation.)

MORE: Buffett pulls ahead in wager against hedge funds

The last person to go from Wall Street defense attorney to the head of the SEC was Harvey Pitt, and Pitt’s tenure at the SEC was brief and mostly seen as a train wreck. (Pitt says White will make a great SEC head.)

To make matters worse, White isn’t the only recent appointee with little or no market experience. The pick to be Tim Geithner’s replacement at the Treasury Department, Jacob Lew, has spent most of his career in Washington focused on budget issues. He too has never been a regulator before. Both White and Lew might work out great, but they seem like odd choices from Obama after fighting so hard for Wall Street reform.

A number of people I talked to said White’s lack of experience as a regulator won’t be a problem. Her husband, John White, previously served as the head of SEC’s capital market division. She was also a board member of Nasdaq. And lots of people want to work with her. “Her Rolodex is as broad as anyone I know,” says Arthur Levitt, a former chairman of the SEC.

But it’s a question of focus, and White’s focus has never been on regulation. The real failure of the SEC under Chris Cox in the run up to the financial crisis was not a lack of enforcement, it was a lack of oversight. Schapiro, and her experience as a regulator, was a reaction to that. So we got a regulator at a time when we probably needed an enforcer. And in the same way White is a reaction to the shortcomings of Schapiro. Hopefully, White will be able to rise above her own.