A Strong Hand for the SEC
President Bush needs to move quickly to restore the Securities and Exchange Commission’s tattered credibility now that Chairman Harvey L. Pitt has finally resigned under pressure. Pitt made a mockery of the agency. Whom Bush selects as Pitt’s successor will signal loudly whether the president is serious about policing corporate malfeasance.
An angry White House thinks it has been compromised by Pitt’s failure to disclose that former FBI and CIA Director William H. Webster, chairman of the government’s new accounting industry oversight board, had been on an audit committee of U.S. Technologies, a company facing civil lawsuits alleging fraud.
However, the problems exposed in Pitt’s tenure run deeper than merely bungling relations with the White House.
Pitt hurt the SEC’s morale by failing to move aggressively against corporate crime, thus allowing New York Atty. Gen. Eliot Spitzer and other state attorneys general to seize the initiative. And Pitt failed to fight administration attempts to renege on increased funding for his agency, money that would help pay for desperately needed investigators, prosecutors and auditors.
Part of Pitt’s legacy is, as Sen. Richard C. Shelby (R-Ala.) has noted, that the appointment process for the new audit committee “is now tainted.” Before Pitt’s resignation Tuesday night, investigations into the SEC chairman’s handling of the Webster appointment were looming; one of them, incredibly, Pitt himself had called for.
The White House needs to clean up the SEC now rather than waiting for Congress to act. With Pitt gone, the White House should ensure that Webster steps down because of the fierce controversy surrounding his murky corporate record.
Most important, the administration needs to appoint as Pitt’s replacement someone like former Sen. Warren Rudman, who commands the kind of respect and integrity that can turn the SEC around. Some of the names being floated -- such as James Doty, a Bush family friend who was chief counsel of the SEC when it investigated George W. Bush for insider trading at Harken Energy and cleared him -- only compound cynicism about the troubled agency.
The only thing worse than having Pitt in office would be appointing a more politically savvy version of him. To help restore confidence in financial markets, the administration must start with an SEC chairman who believes in the agency’s mission to discover and prosecute corporate crime.
