Susan Beck (Litigation Daily, 1/30/13) is feeling “conflicted” about the prospect of Mary Jo White at the helm of the Securities and Exchange Commission. “On the one hand: tough prosecutor,” Beck says. “On the other: protector of Ken Lewis.”

In view of her decade-long stint at the law firm of Debevoise & Plimpton, a White-led SEC “will be scrutinized whether or not it takes action against the likes of Bank of America, JPMorgan Chase, Morgan Stanley, or any other company or person with a connection to Debevoise,” Beck observes. “And recusal issues may become a real problem. Time will tell if White’s fierce advocacy for Bank of America’s former president and other corporate leaders have dampened her concern for ordinary investors.”

But “there is one thing,” Beck adds, that White can do to show “she’s got a spine of steel.” She can take on the credit rating agencies and the built-in conflict of interest of a business model in which they get paid and chosen by the issuers of the securities they rate. As Beck points out, Senator Al Franken (D-Minn.) sold Congress on a random-assignment system, to go into effect automatically unless the SEC recommended another solution to the conflict problem.

“Two-and-a-half-years later, how much progress have we made in that direction?” Beck asks. “None. Okay, I exaggerate. The SEC did finally issue [a mandated] study last month. But this maddeningly meek 82-page document” includes “not a single clear, original thought… Instead of presenting a compelling vision for how a better ratings system could operate, the SEC simply summarizes the various comment letters it received…”

AFR communications director James Lardner was interviewed as the author of a January 2010 report outlining the solution later embraced by Senator Franken. “The law requires the SEC to actually deal with the conflict of interest problem,” Lardner told Beck. “In its report, the commission seems almost bizarrely indifferent to that mandate. They don’t offer an opinion on the random-assignment idea, or any alternative for that matter.”

“So here’s a task for White,” Beck concludes. “Rip up that report, figure out how an investor-oriented credit rating system should operate, spell it out clearly in a new report, and try to implement it… Your allies say you’re tough. Prove it.”