We just lost the whole ballgame on corporate reform without the news even making it to the front page. The sick, sad tidings were tucked away discreetly on the business pages: “SEC Chief Hedges on Accounting Regulator.” Now there’s a sexy headline.
All of you who were shafted by Enron, shucked by Worldcom, jived by Global Crossing, everyone whose 401(k) is now a 201(k) (I think that’s Paul Begala’s line), you just got screwed again. They’re not going to fix it.
They’ve already called off the reform effort; it’s over. Corporate muscle showed up and shut it down. Forget expensing options, independent directors, going after offshore shams, derivatives regulation. For that matter, forget even basic reforms like separating the auditing and consulting functions of accounting firms and rotating accounting firms every few years. Bottom line: It’s all going to happen again. We learned zip from the entire financial collapse. Our political system is too bought-off to respond intelligently.
Even the normally impeccable Lou Dobbs had taken to referring to SEC Chairman Harvey Pitt as “a reformer,” a usage that stretches the language. Pitt, President Bush’s appointee to the chair of the Securities and Exchange Com-mission and a career-long mercenary for the securities industry, is the lawyer who memorably advised in one law journal article: If you get in trouble, shred the evidence. He came in promising to make the SEC “a kinder, gentler place for accountants.” This unpromising champion of reform–appointed to keep the corporations happy–came under such heavy political fire during the financial collapse that he was suddenly out there flirting with Paul Volcker, Arthur Levitt and other genuinely concerned citizens with actual ideas about how to fix this ghastly mess.
No más. According to The New York Times: “Harvey L. Pitt, under pressure from Republicans and former clients in the accounting industry, is backing away from the choice he and other members of the SEC favored to lead the new federal agency that will oversee the industry. Industry executives and at least one prominent Republican lawmaker complained that the top choice, John H. Biggs, was too tough on the industry.”
Biggs, the citizen in question, is head of the pension investment plan TIAA-CREF–not exactly a commie. Nevertheless, he has spoken up strongly for the need to make companies more stringently accountable for stock options, making companies rotate their auditors every few years, and for separating the auditing and consulting functions of accounting firms. Gee, how bold and daring of him. Quel overthrow of capitalism is implied by these obvious, fundamental reforms.
The Sarbanes bill set up a new five-member board to oversee the accounting industry. Biggs was the much-touted choice to head this board–both Pitt and another SEC commissioner had announced their support–when, oops, the accounting industry weighed in. “Congressional aides and current and former SEC officials say the episode illustrates the continued political influence of the accounting profession despite its defeat … on the Sarbanes bill.” Duh.
Lynn Turner, former chief accountant for the SEC, told the Times, “It appears that the accounting firms, the Republicans and now chairman Pitt are trying to circumvent the Sarbanes legislation by making certain that the board does not include a reform-minded person: If we lose Biggs, we lose a reform-minded board.”
The ever-flexible Rep. Michael Oxley, R-Ohio, chairman of the House committee that oversees the SEC, is one of my favorite players in the corporate scandals. First, he was against reform. Then the pressure for reform got so strong even the White House rolled over in front of it, and Our Man Oxley became a reformer, too, signing on to the Sarbanes bill. But now he wants a person of “moderate views,” as opposed to this reincarnation of Lenin, the head of a major pension fund.
You will not be amazed to learn that Oxley’s major contributors are securities and investment firms, commercial banks, insurance, finance and credit companies, and accounting firms. You got to dance with them what brung you.
The Wall Street Journal reports that in addition to pressure from Oxley, Pitt ran up against major lobbying muscle from the accounting industry and further bobbled the appointment by failing to consult two new SEC commissioners. So now we are to get an industry-approved board–just what we need. The Senate Governmental Affairs Committee recently issued its report on Enron, blaming the SEC for “systemic and catastrophic failure.” It is a comprehensive and utterly damning evaluation about which, it now appears, the Pitt-led SEC is prepared to do absolutely nothing.
Several months ago, after it was disclosed that Pitt had met with the CEOs of some companies then under investigation by the SEC, The Wall Street Journal’s editorial board (not to be confused with The Wall Street Journal –I’m convinced those people don’t even read their own paper) called for Pitt’s resignation. Must have been a blue moon, because they were right.
Molly Ivins is a nationally syndicated columnist. Her book with Louis Dubose, Shrub: The Short But Happy Political Life of George W. Bush, is out in paperback.