New SEC Chief Faces Gun-shy Consumers
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WASHINGTON (AP) _ William H. Donaldson, the Wall Street veteran chosen by President Bush to head the Securities and Exchange Commission, faces the mission of restoring investor confidence shaken by financial scandals and leading an agency in disarray.
Bush, introducing the 71-year-old investment banker to reporters on Tuesday, said restoring Americans’ faith in the markets and corporate integrity was essential to the nation’s economic well-being.
Donaldson’s charge, the president said, would be ``to vigorously enforce our nation’s laws against corporate corruption and to uphold the highest standards of integrity in the securities markets.″
Donaldson, who has ties to Wall Street and the Bush family, noted the numerous cases of corporate wrongdoing over the past year and promised to deal with them swiftly.
``It’s time for all of us to pull up our socks,″ he said.
Donaldson’s nomination was met with generally approving reactions Tuesday, and his confirmation by the Senate appeared assured.
Reforms and the policing of corporate America were thrown into turmoil at a critical time for public confidence with the resignations under fire last month of SEC Chairman Harvey Pitt and William Webster, a former FBI and CIA director who had been named to head a new board overseeing the accounting industry.
Pitt and Webster both quit amid the furor over the SEC’s selection of Webster to head the oversight board. So did Robert Herdman, the agency’s chief accountant, whose role in Webster’s appointment is being investigated along with Pitt’s.
Their departures came just when the SEC is investigating and prosecuting the accounting scandals at big companies like Enron Corp., WorldCom Inc. and Global Crossing Ltd., which wiped out investors’ retirement savings, cost tens of thousands of jobs and socked pension funds across the country.
``In recent months the SEC has been rudderless, raising the danger that for the first time since 1933 the markets will fragment as different states seek their own regulations,″ said Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee. ``Hopefully, Bill Donaldson is the right antidote.″
The watchdog agency was created during the Depression in 1934 in response to the stock market crash of October 1929.
Donaldson, Schumer said, possesses ``a rock-ribbed integrity.″
Donaldson was chairman of the New York Stock Exchange from 1990-95 and a co-founder of Donaldson, Lufkin & Jenrette, a well-known investment banking firms.
Democrats and experts appeared to be keeping an open mind Tuesday on the question of whether a Wall Street figure should be named to police investment firms and corporate America.
Senate Banking Committee Chairman Paul Sarbanes, D-Md., who will lose that position next month when the Republicans regain control of the Senate, said he looked forward to ``a thorough confirmation process in which Mr. Donaldson’s record will be carefully examined and his views on the challenges facing the SEC fully reviewed.″
Donaldson’s Wall Street background is potentially helpful, suggested Georgetown University securities law professor Donald Langevoort, a former special counsel at the SEC. ``The question is, is he going to distance himself from it?″ Langevoort said. ``Otherwise, he’s going to be tarred with the insider label.″
Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, said Donaldson’s Wall Street background was among the things that made him a ``first-rate choice for SEC chairman.″
The oversight board, with subpoena authority and the power to discipline accountants, was created by Congress last summer in a law designed to prevent future corporate debacles. It has started its work without a permanent head and under a cloud, and the SEC chairman and four commissioners _ two Republicans and two Democrats _ must name a new chairman.
The SEC also is in the process of putting into effect new rules under the far-reaching law to fight corporate fraud and make companies and auditors more accountable.
Amid uncertain markets and a shaky economy, Bush is moving to revamp his economic team in advance of the 2004 election campaign. On Monday, he named railroad executive John Snow to succeed Treasury Secretary Paul O’Neill. Still to be named is a replacement for White House economic chief Larry Lindsey, who, like O’Neill, was forced out.
Wall Street investment banker Stephen Friedman was said to be the leading candidate, but a final decision by Bush was awaiting the resolution of unspecified personal and professional issues that recently cropped up for Friedman.
Bush also was promising a new tax-cut package, which aides say could cost as much as $300 billion over 10 years, as the White House tries to control political damage from the ailing economy.
Democrats have criticized Bush’s economic team as well as his policies, and had called for Pitt’s resignation.
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