CHICAGO, Dec 18, 2008 (AFP) - President-elect Barack Obama Thursday nominated Mary Schapiro to take over the Securities and Exchange Commission, an agency under withering fire for its lapses in the current market turmoil.

Schapiro, 53, is a career financial regulator who, if confirmed by the Senate, would be the first woman to chair America's top markets supervisor at a time of rare peril for Wall Street and the economy.

Calling Schapiro "smart and tough," Obama said one of his most pressing legislative priorities were "common sense rules of the road" to drag financial oversight up to date.

An alleged 50-billion-dollar fraud by investment baron Bernard Madoff "has reminded us yet again of how badly reform is needed when it comes to the rules and regulations that govern our markets," Obama said.

The president-elect also tapped former Treasury official Gary Gensler to serve as chairman of the Commodity Futures Trading Commission (CFTC), a job once held by Schapiro.

And he nominated Dan Tarullo, a Georgetown University law professor and top economic adviser to the Obama campaign, to serve as a governor of the Federal Reserve.

Schapiro said "there is much work to be done" to restore morale and leadership at the SEC.

"The only way to restore the trust that has been lost is through effective thoughtful reform of our regulatory structure, and the consistent and robust enforcement of our financial regulations," she told the news conference.

Under its current chairman Chris Cox, a Republican with a zeal for deregulation, the SEC is accused by critics of turning a blind eye to market abuses by well-connected banks and financial firms.

The agency failed to detect ample signs of trouble on Wall Street that helped lead to the global economic meltdown, and Cox has been forced on the defensive by the allegations of stunning fraud surrounding Madoff.

Schapiro's selection to head the SEC and its staff of more than 3,600 is another example of Obama opting for experienced hands who served under the last Democratic president, Bill Clinton.

She served in the mid-1990s as chairwoman of the CFTC, the agency that oversees market trading of oil, corn and other commodities.

Schapiro, who was appointed by former Republican president Ronald Reagan as an SEC commissioner, serving for six years, now heads the Financial Industry Regulatory Authority, a self-regulating agency for Wall Street.

"There was a very short list of candidates for SEC who could save the agency from extinction and Mary Schapiro was on that short list," said Jacob Frenkel, a securities lawyer who worked with Schapiro as senior counsel in the SEC's enforcement division.

"She was always regarded as a very thoughtful, level-headed and enforcement-oriented regulator," he said.

"She surrounded herself with very strong people in her prior tenure with the commission. Hopefully she'll bring some of them back."

Obama's cabinet line-up is now largely complete as the president-elect prepares to leave this weekend for a Christmas break in Hawaii.

Still to come are his selections for labor, transportation and the US trade representative, and his intelligence chiefs.

Obama will Friday reportedly nominate Ray LaHood, who is retiring from his House of Representatives seat for Illinois, to oversee the department of transportation and a planned spending spree on bridges and roads.

LaHood would be the second Republican named to Obama's cabinet after Robert Gates, who is staying on as secretary of defense.