Pitt: Broad-shouldered regulator wanted

Link: SEC in Crisis

and SEC chief Harvey Pitt resigns

It’s not hard to see why he went: it was only a matter of time before the transparency and perception that is currently being forced on companies, should also be required of those that oversee them.

And Pitt had clearly compromised himself by withholding information from his fellow commissioners over the appointment of William Webster as head of the chairman of the fledgling Public Company Accounting Oversight Board.

So at the Financial Services Authority Sir Howard Davies will be wondering whether he can expect renewed flack over his joint role as chairman and chief executive at a time when the companies the FSA regulates are required to separate the position.

And at the Audit Commission, James Strachan – who has had his feet under the desk for only a matter of hours – will be fearing a barrage of fresh criticism over his appointment. As the partner of arts minister Tessa Blackstone, he has faced allegations of cronyism. And the Tories smell blood.

In this climate who would be a regulator? And more pressingly who will replace Pitt? It’s one of the most powerful jobs around, perhaps second only in the corporate world to that of the chairmanship of the Fed where Alan Greenspan wields the power to move markets with a single utterance.

But as Pitt found to his cost, the profile of the position can make life unbearable.

It is that profile that might just rule out external candidates as likely replacements. Better the devil you know, if you like.

So Pitt’s successor may well come from within the SEC.

But there are problems here too. Later today the SEC is expected (or at least was expected until Pitt’s decision) to unveil a proposal to require US corporate lawyers to blow the whistle on company officials who violate securities and other laws. One of Pitt’s problems was that he was deemed to be too close to the accounting industry – he had previously acted for the then Big Five – at a time when he was supposed to be cracking down on them.

But, given the SEC’s twin regulatory pushes on accountants and lawyers, that perception of compromise would count against its other commissars too.

Harvey Goldschmid is currently on leave from the Columbia University School of Law, where he serves as Dwight Professor of Law. Roel C. Campos has worked for major US law firms as a corporate transactions/securities lawyer and litigator.

At first glance Cynthia Glassman looks a strong contender. She spent more than 30 years in the public and private sectors focusing on financial services regulation including 12 years at the Federal Reserve and a spell at the US Treasury department where she worked as a senior economist during the Carter Administration.

But it is Glassman’s five years at Ernst & Young, in the risk management and regulatory practice and the quantitative economics and statistics group that might rule her out. She too could fail the independence perception test.

That leaves Paul Atkins. Having worked under Pitt’s predecessors Arthur Levitt and Richard Breeden , he certainly knows the ropes. With a 20-year career focusing on the financial services industry and securities regulation, he would be a safe pair of hands.

Again Atkins is a lawyer, so his professional training might count against him. But, boosted by the fact that he has been away from the legal coal face for some time, he might just have enough regulatory experience to override those concerns.

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