Clueless at the SEC

July 28, 2002

FOR A BRIGHT guy, Securities and Exchange Commission Chairman Harvey Pitt seems breathtakingly lacking in political smarts.

He earned a rep right off for being too cozy with the financial industries he regulates. His first year in office has been marked by a seemingly endless string of corporate bookkeeping scandals. He was lukewarm at best about legislative efforts to impose tough new accounting standards in the wake of these scandals. Thus, when critics went looking for a scapegoat as a crisis of investor confidence sent the financial markets into a tailspin this month, Mr. Pitt was a prime target.

So, what does he do? Asks Congress for a promotion, of course.

Mr. Pitt now acknowledges that the timing of his bid to elevate the SEC post to Cabinet rank, offered as a last-minute addition to the reform bill Congress passed last week, was a big mistake. He just wanted to give his agency more clout to protect investors, he said. He doesn't care a fig about boosting his own salary. He's already rich.

But his failure to anticipate the contemptuous reaction his request would draw on Capitol Hill raises grave questions. Can someone so tone deaf to politics be of any real help in restoring the public trust desperately needed to get the financial markets back on an even keel?

If the president had a strong economic team in place elsewhere, the nation would probably benefit most from new leadership at the SEC.

With a more urgent change required at Treasury, though, Mr. Pitt should remain in place to minimize disruption. The experience he boasts of so frequently could be especially valuable as the SEC moves to implement reforms just approved by Congress.

So, he's got another chance to return to his roots as the youngest SEC counsel ever and perform his watchdog role with the tenacity it demands.

He already has all the clout he needs to do the job - plus a fatter budget and a full complement of freshly confirmed commission members. He just needs to demonstrate the will to do it right.

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