"It was harder than I thought it was going to be," Schapiro, 57, said during an interview in her office that looks out on the Capitol dome.

"You have this nice little box of things you want to do all tied up with a bow, and you walk in the door and it's very hard to keep at least one eye on that agenda while you're dealing with the flash crashes and the new legislation and the whole range of things that happened," she said.

Taking over as the SEC was pilloried for letting bankers run amok and for missing frauds like Bernard Madoff's multi-billion-dollar Ponzi scheme, Schapiro won praise for tackling operational problems. Thrust into the limelight, she posed for the cover of Time magazine as a "sheriff of Wall Street" and was ranked the world's 17th most-powerful woman by Forbes.

She soon found herself contending with issues ranging from stock-market technology going haywire to employees viewing pornography at work, while managing a raft of Wall Street probes and new rules mandated by the Dodd-Frank Act. She testified in Congress more than 40 times, advocating for the agency and admitting mistakes, including a 10-year lease the SEC signed without competitive bidding for office space it didn't need.

Schapiro bulked-up the enforcement unit to root out wrongdoing that led to the 2008 crisis, forcing Goldman Sachs Group Inc. to settle for $550 million and Angelo Mozilo, co-founder of lender Countrywide Financial Corp., to pay $67.5 million. The SEC sued the former heads of Fannie Mae and Freddie Mac, who are fighting claims they understated investments in subprime loans.

Dropping Lehman

Still, SEC lawyers failed to take action against anyone at Lehman Brothers Holdings Inc. or American International Group Inc., two companies at the epicenter of the credit crisis. The agency was attacked by lawmakers, judges and consumer groups for making few claims against individual Wall Street bankers.

Investor advocates who lauded Schapiro's appointment grew disappointed over time. They said she didn't have the fortitude to overcome splits inside the commission, lobbying and legal assaults by the financial industry and demands from a partisan Congress. That didn't play to her strengths as a conciliatory manager and career regulator.

"She's been chairman at an extraordinarily difficult time," said Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America. "It may be that the times called for someone either with a thicker hide or more combative nature."

In the view of some in the securities industry, Schapiro has been a balanced overseer. R. Cromwell Coulson, chief executive officer of New York-based OTC Markets Group Inc., said she did a good job dealing with events outside her control.

"She had the three C's — a crisis, Congress and the courts — really boxing in her tenure," Coulson said.

With 4,500 employees in 11 outposts across the country, the SEC is an unwieldy behemoth. Its responsibility to police the markets includes such unrelated tasks as unearthing insider trades, examining disclosures about chemicals used in natural gas fracking and writing rules for trading technologies so new that experts can't agree how to define them. Even in smooth economic times, chairmen have struggled to tame the agency.

During the 2008 crisis, Schapiro's predecessor, Christopher Cox, was sidelined as Federal Reserve Chairman Ben S. Bernanke and then-Treasury Secretary Henry Paulson moved to rescue the financial system.

Cox's Party

Cox, a former Republican congressman from California, was at a birthday party the night the government pushed the sale of Bear Stearns Cos. on JPMorgan Chase & Co. Later, when Paulson proposed a new regulatory blueprint that called for eliminating the SEC, Cox didn't express strong objections.

Cox was traveling and unavailable for comment, said a spokesman for law firm Bingham McCutchen LLP, where he works.

Schapiro grew up in Babylon, New York, the daughter of a printer and a librarian. She graduated from Franklin & Marshall College in Lancaster, Pennsylvania, before earning a law degree from George Washington University. A political independent, she worked at the Commodity Futures Trading Commission, was named an SEC commissioner by President Ronald Reagan in 1988 and returned to the CFTC as chairman under President Bill Clinton.

In 1996, Schapiro joined the National Association of Securities Dealers, a brokerage-industry oversight body, and about 10 years later led its merger with the New York Stock Exchange's regulatory unit to form the Financial Industry Regulatory Authority, a Wall Street-funded overseer of more than 4,000 firms. Finra's board later issued a report criticizing the organization for missing signs of Madoff's Ponzi scheme as well as R. Allen Stanford's $7 billion fraud.

For a regulator, it was a lucrative job. Schapiro, who also served on the boards of Kraft Foods Inc. and Duke Energy Corp., received a payout of about $9 million as Finra's CEO when she left to head the SEC.

Schapiro, the SEC's first female chairman, was installed as Obama administration officials floated a plan to strip down the regulator's responsibilities, or merge it into another agency.

"The environment was just incredibly tense," Schapiro said in the interview. "Madoff had just been arrested, the financial-crisis consequences were still unfolding, the market was plummeting and people were in fact talking about abolishing the agency."

She said her first job was "to try to stem the tide of skepticism" and then to focus on long-term needs. She removed hurdles for investigators and hired new senior staff. By the time Dodd-Frank was enacted a year and a half later, the SEC was handed wider jurisdiction and more funding.

'Enormous Credit'

"I give her enormous credit for — virtually single-handedly — preventing the commission's demise," former SEC chairman Harvey Pitt said, adding that her greatest contribution was "restoring the agency's credibility and importance."

Schapiro recruited Robert Khuzami, a former prosecutor then at Deutsche Bank AG, to head enforcement. He cut a layer of management, formed groups to focus on specialized areas of wrongdoing and created a system for handling tips about frauds. She tapped Carlo di Florio from PricewaterhouseCoopers LLP to revamp the inspections unit, which also had been faulted with missing the Madoff fraud.

The SEC says it has brought 115 cases related to the credit crisis, including 57 against senior managers. Yet big Wall Street CEOs and other executives haven't been among them.

In March 2010, Lehman's court-appointed bankruptcy examiner publicly detailed the firm's questionable accounting methods, saying some top executives may have violated their duties to shareholders. While SEC investigators determined there wasn't enough evidence to bring a case, federal judges have allowed some shareholder lawsuits to proceed.

Later that year, U.S. District Judge Ellen Huvelle scolded the SEC for extracting "unimpressive" penalties from two executives named in a $75 million settlement with Citigroup Inc.

"When you bring this long complaint and make it sound like there have been all these misdeeds, who's responsible?" the judge asked at a hearing in Washington. "These things don't happen without individuals."

Khuzami said in a December speech that critics are fueled by "misconceptions" about the SEC's powers. He has said that bad business decisions aren't necessarily fraudulent and that if there is a fraud, regulators need hard evidence that top executives knew about it before they can file a case. He also has defended the practice of allowing firms to settle without admitting wrongdoing, saying it resolves actions that otherwise could drag for years through the courts.

Criticism of the record, though, resonates even inside the SEC. Commissioner Luis Aguilar, a Democrat, said in a Washington speech yesterday that public concern about the lack of financial-crisis cases against executives was understandable.

"The investing public has a right to expect that government regulators will continue to hold accountable those individuals responsible for misconduct — and that includes those culpable at the top, not just the flunkies below," Aguilar said.

Lynn Turner, a former SEC chief accountant, said that the agency's actual enforcement record signals to Wall Street that the tough talk is just rhetoric.

Schapiro "has created a culture where it is better to ask for forgiveness than beg for permission," Turner said. "And the trouble is, she always forgives them."

Behind Schedule

Aside from legal action against Wall Street, the most visible part of the SEC's work under Schapiro involves Dodd-Frank, the biggest rewrite of finance regulation since the Great Depression. Two years after Congress handed the SEC the challenge of crafting almost 100 rules, the agency is behind schedule on about half of them, according to a tally by Davis Polk & Wardwell LLP.

Daniel Gallagher, a Republican commissioner, said rules haven't been taken up in the order of their importance. In a Sept. 24 speech, he called Schapiro's agenda a "scattershot menu of short-term and reactive priorities."

Gallagher questioned, for example, why Schapiro devoted time to regulations related to where firms get their minerals and how they account for natural-resource extraction. Instead, he said, the SEC should have focused on fixes that could prevent another crisis, such as the Dodd-Frank mandate that the agency remove references to credit-rating companies from its rule book.

The companies had been lambasted for giving top ratings to securities that turned out to be toxic, helping to fuel the crisis. Excluding them would protect investors "more than any other action the commission has taken since Congress took bold action to give the SEC formal oversight of credit-rating agencies," Gallagher said.

Jeff Connaughton, who was chief of staff to Ted Kaufman, then a Democratic senator from Delaware, said Schapiro's equanimity has kept the agency from solving tough policy problems such as how to cope with changes in the structure of the markets.

Connaughton, author of "The Payoff: Why Wall Street Always Wins," said he pressed Schapiro to harden rules for high-frequency trading before and after the so-called flash crash — a May 6, 2010, market drop that temporarily erased $862 billion from stock values.

"She is a regulator by consensus," Connaughton said. "I could tell from the first time I met her that there was not a whiff of boldness about her."

Schapiro said she's a pragmatist who believes that building a consensus is the way to navigate among strongly opposing views and "actually accomplish things."

'Busiest' Period

She disagreed with Gallagher's assessment, noting that although the agency isn't finished it has already removed references to credit-rating firms from 18 rules, in some cases before Dodd-Frank was even passed. She said she has balanced deadlines set by lawmakers with the need to respond to real-time challenges.

"We've had one of the busiest rule-making periods in the entire history of the agency," Schapiro said.

"Does everybody have individual things they'd love to see at the top of the queue? Without a doubt. Myself included," she said. "But we have to follow a script that Congress laid out for us."

Schapiro said she's confident her agenda has produced significant progress. She cited the money she poured into new technology for managing cases and handling tips, a program to pay whistleblowers and a tripling of the staff-training budget. She hired industry experts and created a division to sniff out market risks and perform economic analysis for rules.

Under her supervision, she said, the enforcement unit filed "more complex and consequential" cases and returned a record $3.6 billion to investors from penalties in fiscal years 2010 and 2011.

Schapiro also restructured the unit that reviews company disclosures to focus on large financial institutions and to probe for gaps in filings by firms selling shares to the public for the first time. That was the unit that pressed both Groupon Inc. and Facebook Inc. to provide investors with more details before their initial public offerings.

On another issue related to IPOs, Schapiro drew criticism from consumer groups and investor advocates.

In April, Obama signed the bipartisan Jumpstart Our Business Startups Act, which aims to spur investment in new firms. Among other things, it allows closely held companies to sell shares over the Internet via "crowdfunding" and lets hedge funds advertise for investors. After the House passed its version and the Senate was about to take it up, Schapiro wrote a March 12 letter to lawmakers asking that the bill be "modified to improve investor protections."

'Lowest Point'

Arthur Levitt, a former SEC chairman who said he applauds Schapiro for pulling the agency back from the brink in 2009, was disappointed by her response to the bill. He said the agency's failure to aggressively oppose the JOBS Act "was the lowest point" of her tenure.

"I'm glad that Mary wrote a letter, but it was far less firepower than was required to fight legislation more harmful to investor interests than any in my memory," said Levitt, who is a board member of Bloomberg LP, parent of Bloomberg News.

Roper, of the consumer federation, said it was the responsibility of Schapiro and the rest of the SEC's leadership to make sure the bill didn't unravel protections against fraud and abuse that had been in place for decades.

"It says they don't feel the same responsibility to measure harm to investors as much as they have to measure the cost to businesses," said Roper. "If that holds out, then they're done as an investor-protection agency, and that will be her lasting legacy."

For Schapiro, her legacy was meant to include money-market funds. While her proposal collapsed in the face of industry opposition and her inability to persuade her fellow commissioners, she said she still considers the process "a big success" because it raised public awareness that is helping to revive the push for new rules.

Regulators see what happened in 2008 as a warning that money funds could precipitate another crisis. The $62.5 billion Reserve Primary Fund "broke the buck" — its share price fell below $1 — because it held $785 million in Lehman debt when the broker went bankrupt. Reserve Fund clients rushed to redeem their shares, and the panic spread.

The issue is "the big one," Schapiro said in the interview. "I would say money funds is the most important for us to tackle."

Extra Capital

Her plan, developed in conjunction with the Treasury and the Fed, called for funds either to hold extra capital to prepare for stress or get rid of their stable $1 share price, which lulls investors to think they can't lose money. While many investors treat the funds as though they were savings accounts, they aren't protected by the Federal Deposit Insurance Corp.

Schapiro gave speeches, testified in Congress and oversaw the drafting of a 300-page proposal. Mutual-fund companies, saying the changes would destroy rather than save the product, enlisted the U.S. Chamber of Commerce in a lobbying campaign. They blanketed the Washington subway station next to the agency's headquarters with ads attacking the plan.

By the end of last year, Schapiro knew that at best she had a 3-2 majority — her own vote and those of the two Democratic commissioners, Aguilar and Elisse Walter. Gallagher and the other Republican member, Troy Paredes, had already indicated they thought changes weren't necessary.

In the following months, fund companies and their supporters met with commissioners, including 11 times with Aguilar, SEC disclosures show. He began to telegraph his doubts, saying more study might be needed.

When her plan was ready, Schapiro set an Aug. 29 vote. About a week before the meeting, Aguilar told Schapiro he'd decided not to support it.

Schapiro and her aides huddled in her office. They considered going ahead with the vote anyway, on the theory the session might publicly shame Aguilar and the two Republicans blocking the changes, according to the two people with knowledge of the Aug. 22 meeting who spoke on condition of anonymity because of the sensitivity of the matter.

Instead, Schapiro decided to cancel the vote and issue her statement. "The issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away," she wrote.

'Stunning' Decision

Some dissenting commissioners took her comments personally, further straining relations. Gallagher, for instance, read the statement in a news story while taking a train home. He called Schapiro from his mobile phone, blasting her for not warning him, according to a person familiar with the matter who spoke on condition of anonymity because the talk was private.

In the interview, Schapiro said she wasn't trying to take shots at her colleagues. Still, she said it was "stunning to me" that the three would not even agree to vote to put the proposal out for public comment — only the first step in getting new regulations approved.

The following month, Treasury Secretary Timothy F. Geithner acted under new powers granted by the Dodd-Frank Act to force the commission to take up the issue again. Asked this week for his assessment of Schapiro, Geithner praised her for "doing a tremendous job restoring the integrity of the SEC, rebuilding the SEC's enforcement capacity and strengthening protections for investors."

Schapiro said she welcomed the intervention and is eager to reopen discussions at the commission. As long as a revised plan doesn't "pay lip service to things that aren't meaningful reforms," she said she's willing to compromise.

"My goal wasn't to be a martyr," she said. "My goal was actually to get this done."

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