Washington Outlook
Edited by Mike McNamee
The SEC: No Boss. No Accounting Cop. Where Does It Go from Here?
The timing couldn't be worse. At one of the most critical points in its 68-year history, the Securities & Exchange Commission is rudderless. Although Chairman Harvey L. Pitt has not yet officially exited, his Nov. 5 resignation has eased political attacks and lifted morale. But it has also left a leadership vacuum just as the SEC is getting down to writing 27 major new rules and reports mandated by the Sarbanes-Oxley corporate-reform law. The Nov. 12 resignation of William H. Webster, the head of a new accounting oversight board that reports to the SEC, only makes the situation worse. How bad is it? Correspondent Amy Borrus takes a look.
Has the SEC ground to a halt?
Surprisingly, no. Despite turmoil at the top and chronic underfunding, the staff has maintained a frantic pace of rule-writing and investigations--and is not likely to slow down now. Most of the rules the agency must write, such as curbs on off-balance-sheet transactions, don't create partisan divides.
The SEC's division directors--most of whom are career staffers--traditionally operate with lots of autonomy. That's true especially at the Enforcement Div., which is conducting a record number of investigations into corporate fraud. Pitt's resignation "will not affect us at all," says Enforcement Director Stephen M. Cutler, who is working with state regulators to craft a plan to curb Wall Street analysts' conflicts of interest.
O.K., but without a chairman, won't the accounting watchdog be kept on a short leash?
Yes. The SEC commissioners can appoint a replacement for Webster. But because the board and the commission are supposed to work closely, they're likely to wait until a new SEC chairman is in place. After the Webster debacle, the White House will want a louder voice, too. And there's no obvious candidate. The initial front-runner, John H. Biggs, until recently CEO of pension-fund giant TIAA-CREF, is probably too tarred by partisan fighting to get the nod. Lacking a chairman will make it tough for the new board to hire top staff and make more than routine decisions. And as long as Pitt is around, the board will steer clear of sensitive issues, such as whether to rewrite the guidelines for company audits.
So when is Pitt leaving?
President George W. Bush would love to close the book on Pitt's turbulent tenure. If he named one of the two other GOP commissioners--Paul S. Atkins or Cynthia A. Glassman--as acting chair, Pitt would decamp. But that would leave a four-member commission evenly split along party lines--and most likely dominated by pro-reform Democrat Harvey J. Goldschmid. But if Bush keeps Pitt around until the Senate confirms a successor, he faces criticism anytime Pitt's side wins a close vote. A likely flash point: new rules governing consulting work by accountants. Pitt, who opposed curbs on the ability of accounting firms to consult for audit clients, will probably favor rules that permit exceptions. The two Democrats will seek tight curbs.
When Pitt finally goes, who'll take over?
Ideally, the White House wants a squeaky-clean former SEC hand who can recharge the agency. And a law enforcement background would reassure investors. That puts Assistant Attorney General Michael Chertoff, former federal judge Stanley Sporkin, and James R. Doty, SEC general counsel during Bush I, in the running. Also being mentioned: former NASD Chairman Frank G. Zarb. Another option is an academic with no embarrassing baggage, such as Stanford professor Joseph A. Grundfest, a former SEC commissioner.
CAPITAL WRAPUP
Go Canada
Two ex-critics of Canada's trade policy have teamed up to defend Ottawa against charges by the Bush Administration that it is dumping subsidized lumber into the U.S. market. When he was the Reagan Administration's trade ambassador, William E. Brock criticized Canada for its export subsidies and import quotas. As President Clinton's ambassador to Canada, James J. Blanchard also took Ottawa to task for its trade barriers. Now, they co-chair the U.S.-Canada Partnership for Growth to fight a 27% penalty tariff on Canadian softwood. The group will register with the Justice Dept. as a foreign agent since it is being funded in part by Canadian lumber interests.
CAPITAL WRAPUP
Lost in Space?
With tax cuts and rising military spending a certainty in 2003, lawmakers looking to trim the budget are gazing longingly at NASA's $15 billion allocation. Many are becoming convinced that the space agency is not offering enough value for its taxpayer dollars, especially with huge cost overruns on the space station.
CAPITAL WRAPUP
Now That's Hungry
How hungry are pols for campaign money in the new no-soft-money era? Just before the election, one business lobbyist received an invitation to a fund-raiser from Republican Senator Peter Fitzgerald of Illinois, where Democrats swept the Senate and governor's races on Nov. 5. Not surprising--except that the invite was for 2004.
|
Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
