Jewish World Review Oct. 17, 2002 / 11 Mar-Cheshvan, 5763
http://www.jewishworldreview.com | You've got to love Washington. Despite the worst corporate scandals in our country's history and the worst bear market since the Great Depression, Democrats and Republicans are still playing politics with the integrity of the marketplace.
Just this week, Securities and Exchange Commission Chairman Harvey Pitt said the SEC is "due to consider" proposals to split research from investment banking - arguably the best way to finally crack down on the rampant conflicts of interest among Wall Street firms.
Pitt's reason for wavering on this crucial issue? "I want to be certain that when structural changes are made, they do not leave investors without access to quality research," he said
Chairman Pitt, get real.
That same so-called "quality" research that you want to protect helped rob investors of $8 trillion over the past two and a half years. Investors aren't in the mood for the same old games. They understandably want someone - anyone - to do something to stop the carnage. And one of the people they're looking to is you.
In your defense, you've instituted reform forcing CEOs and chief financial officers to certify their corporations' financial statements. And you moved quickly to charge WorldCom with fraud.
But you've also contributed to the unnecessary controversy since day one of your confirmation. Critics said your background as a lawyer for the accounting industry would make it impossible for you to do your job impartially. In fact, your in-depth knowledge of this complicated territory makes you one of the few people in the country who can do the job effectively. If your past experience was the only point of contention, you would have risen above the fray months ago. Unfortunately, it was only the first of a series of miscommunications and missteps.
Your latest controversy is the Sarbanes-Oxley accounting and corporate reform legislation, which mandates that an accounting standards board be put in place by the end of this month. With the clock ticking, you're reportedly backing off appointing a critic of the accounting industry - John Biggs, the head of TIAA-CREF funds - to head the accounting oversight board.
Your waffling prompted Sen. Tom Daschle and Rep. Dick Gephardt this week to demand that President Bush fire you. That call, in turn, prompted White House spokesman Ari Fleischer to accuse Daschle and Gephardt of playing politics.
With three weeks until Election Day, I think it's safe to say everyone in Washington is playing politics. But that's not the point. The point is: Why are you and other policymakers wasting time on this when so much else needs to get done in order to restore investor confidence?
By not making a decision, you've left yourself wide open to attacks and unnecessarily slowed down the reform process. While Biggs, like everyone else in this episode, has hardly handled himself well, he's a good person for the job, and I think he'll do well at it. I still have confidence you'll do well at your job, but it's time to tell the accounting industry, in no uncertain terms, to stuff it. Let's get on with it.
Your recent decision to join forces with New York Attorney General Eliot Spitzer is a positive sign. Spitzer is riding high following his $100 million settlement with Merrill Lynch in the analyst conflict-of-interest case and his investigation of alleged IPO kickbacks at Salomon Smith Barney and CS First Boston.
Together, you and Spitzer can work to speed up and successfully conclude your probes. Spitzer has made significant progress in rooting out wrongdoing, pushing through real reforms and being politically savvy.
The same could still be said of you.
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