Sun, May 05, 2002 - Page 10 News List

Post-Enron residue all over Wall St.

AFTER THE STORM Securities and Exchange Commission Chairman Harvey Pitt is meeting with the most powerful men on Wall Street in an effort to improve corporate policy

NY TIMES NEWS SERVICE , WASHINGTON

Securities and Exchange Commission Chairman Harvey Pitt in his office in Washington on Wednesday acknowledged that ``over the last few months, institutions and professions have been rocked by the taint of misconduct and greed.''

PHOTO: NY TIMES

Harvey Pitt was insistent. The way companies account for the stock options they give to executives, he told a Senate panel in late March, had absolutely nothing to do with the collapse of Enron, whatever the conventional wisdom held.

Two weeks later, Pitt, the chairman of the Securities and Exchange Commission, delivered a speech in Chicago outlining a set of proposals to eliminate abuses associated with stock options. The plan was more modest than the one he had dismissed; still, he acknowledged that "over the last few months, institutions and professions have been rocked by the taint of misconduct and greed."

The rhetorical shift was vintage Pitt. Eight months into a tumultuous tenure at the SEC, Pitt is maneuvering to find the right voice as the Bush administration's top cop on Wall Street.

His natural instinct -- hewn in a long career as a lawyer representing virtually all the most powerful interests in finance -- is to meet privately with insiders and exhort them to come up with plans to better police themselves rather than face a tougher hand from Washington.

But with Enron unleashing a gale of suspicion about Wall Street and corporate accounting, he has repeatedly been pressed to get tough -- not least by an aggressive investigation of stock market analysts by Attorney General Eliot Spitzer of New York.

On issue after issue, from corporate governance and accounting oversight to the agency's own budget, Pitt's response has been to try to head off the broadest and boldest proposals by coming out with narrower, and what critics consider timid, alternatives.

As Washington prepares for an election season, the question is whether Pitt, in moving deliberately, has made the right calculation.

The emerging view is that if there are no more shocking corporate failures of the magnitude of Enron or Global Crossing, the political imperatives of cleaning up the markets and tightening corporate oversight will largely fade by the fall.

But some analysts say that if the perception jells that the SEC has moved slowly in the face of turmoil, it could present problems for both Republicans in Congress and President Bush. The White House, happy to distance itself from Enron-related matters, has deferred on corporate and securities law issues to Pitt, the only senior Republican official in Washington with significant Wall Street experience.

Moreover, as the recent fencing between Pitt and Spitzer has shown, hesitancy on the part of the SEC could actually yield tougher rules for Wall Street and corporate America, if other regulators or Congress steal a beat on the agency.

"The commission has been slow and incomplete, and that's what allows and indeed justifies Attorney General Spitzer," said James Cox, an expert on securities and corporate law and a professor at the Duke University School of Law.

"There's a crisis of confidence in the Securities and Exchange Commission, and that's unfortunate," Cox said. "This is a bad time for it. The confidence has been shaken of investors by the magnitude of the collapses we have seen, whether Enron and Global Crossing, the unprecedented volume of earnings restatements, and the slowness of the agency's responsiveness. It will take a while to get the train back on the track."

Denials

In a wide-ranging interview this week, Pitt acknowledged that his views on an array of issues had evolved in recent months. But he disputed the notion that the agency had been co-opted by his former clients -- which included the stock exchanges, investment houses, mutual fund companies and all of the Big Five accounting firms -- or that it had failed to move aggressively.

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