Since politicians depend on money from private interests to fund their campaigns, there's not much that can be done to reduce radically the influence industry holds over regulators. But some small steps could make a difference. For starters: more transparency in regulatory decision-making. At the SEC, for example, some key decisions are deliberately relegated to staff, which can meet in private, unlike the commissioners. More of the agency's business should be out in the open.
SEC Chairman Harvey L. Pitt's "two strikes and you're out" proposal for corporate bigwigs is also on the right track. He wants the power to ban corporate miscreants from serving as officers and directors. But the proposal's effectiveness hinges on the fine print. If it applies only to those convicted of financial crimes, it could be meaningless, since the SEC settles most cases.
Without adequate funding, though, the financial cops won't be able to police their beat. The SEC's workload has soared even as staffing has remained stagnant. Congress should approve a hefty increase in the agency's budget, including Pitt's request for pay parity to retain top lawyers and accountants. Likewise, lawmakers should require accounting firms to pony up annually to fund the Financial Accounting Standards Board instead of forcing the rulemakers to go hat-in-hand to the firms they joust with.