New York Gov. Andrew Cuomo on Thursday handed a critically important bank regulatory position to a long-time donor and corporate lawyer who defended financial institutions in private practice.

Cuomo nominated Maria Vullo to run the New York Department of Financial Services (DFS).

Benjamin Lawsky, Vullo’s predecessor in the office, gained a reputation as the toughest cop on Wall Street, imposing heavy fines for money laundering, accounting fraud, tax evasion, and fraudulent mortgage servicing. Lawsky used the ability to ban financial firms from business in the world financial center in New York to extract real accountability for wrongdoing.

And Lawsky’s aggressiveness shamed other regulators, prompting them to increase their activity.

maria-vullo

Maria Vullo

Photo: Paulweiss.com

Vullo, a former deputy to Cuomo in the state attorney general’s office, currently serves as Of Counsel for Paul, Weiss, Rifkind, Wharton & Garrison, a white-shoe law firm in New York. She was a partner at Paul, Weiss for 20 years, and in her time there represented Wells Fargo and other “businesses in investigations and civil lawsuits stemming from the financial crisis,” according to the firm’s website.

Cuomo benefited from Lawsky’s aggressiveness, because he could use DFS fines to fund New York government operations without increasing taxes. But Wall Street bankers routinely criticized Lawsky for his rough treatment.

After Lawsky announced he would step down last summer, Anthony Albanese, a top deputy to Lawsky, served as acting director. But he also stepped down, amid rumors that Cuomo interfered in the agency’s business.

Now, Cuomo has selected Vullo, a long-time ally, who has contributed $83,716 to his campaigns since 2005. Vullo ran the economic justice division of the state attorney’s general office under Cuomo in 2010. There she handled some financial-related cases, prosecuting Ivy Asset Management for fraud related to the Bernie Madoff scandal, and Ernst & Young for faulty auditing of Lehman Brothers. Cuomo briefly considered Vullo for a state judgeship before nominating her to run DFS.

Cuomo critics fear that Vullo’s Wall Street ties could lead to a significant rollback of an office that served as a model for the nation on financial oversight. The fact that she picked up support from Kathryn Wylde, founder of the Partnership for New York City, should add to that concern.

Wylde was one of Lawsky’s top critics, accusing DFS of creating a “punitive atmosphere.” Wylde said Vullo has “credibility … with the financial industry, thanks to her many years in private practice.” She added that Vullo “will be an asset in keeping New York the world financial capital.”

In his announcement of Vullo’s nomination, Cuomo called her “a dedicated, tough, and fair litigator with the right combination of public- and private-sector experience needed to lead the Department of Financial Services.”

Vullo, in a statement, thanked the governor for the nomination. “I look forward to working with the talented men and women at DFS to strengthen our markets and protect investors and consumers from unlawful business practices.”