To say that Harvey Pitt’s career as a securities lawyer displayed little concern for the small investor is to politely understate his résumé. An attorney of considerable brilliance, the embattled chairman of the Securities and Exchange Commission made his own name (and fortune, at upwards of $300 an hour) as the champion of big accounting firms like Arthur Andersen and big Wall Street crooks like Ivan Boesky. He fought ardently against reform during the Clinton years. And before that, he went out of his way to punish federal whistle-blowers who had exposed a major corporate scandal during the Reagan administration.
When Mr. Pitt returned last year to the S.E.C., where he was once general counsel, it was as the choice of a President who appeared eager to undo every regulation that might inconvenience the business leaders who so lavishly financed the Bush-Cheney campaign. So it’s understandable that many Americans, alarmed by recent revelations of corporate crime, would worry that he will police the market about as diligently as Hugh Hefner would guard a harem.
But as the President pointed out the other day, Mr. Pitt was confirmed by a unanimous vote of the Senate-and he deserves an opportunity to prove that he is, as he insists, a “man of integrity” who will now implement bipartisan reforms and hunt down the white-collar Capones.
Mr. Pitt should no more be obliged to quit at this point than the Senators who voted to confirm him, including John McCain of Arizona, his leading critic. The Arizona Senator complains that the S.E.C. chairman has too many former clients whose cases force him to recuse himself, but that problem should have been foreseen during his confirmation hearings. The solution is for the Senate to insist that the White House send over more independent-minded appointees for the open S.E.C. positions.
That doesn’t mean Mr. Pitt should be free from searching scrutiny as he tries to prove himself worthy of his job. Although on paper he is highly qualified for the S.E.C. chairmanship, his conduct in office will determine whether he should be permitted to keep the job. Already he has displayed poor judgment in meeting with executives from three companies under investigation by his agency. In two of those cases, vigorous enforcement action went forward anyway, but Mr. Pitt would be well-advised to avoid such incidents in the future.
Like Senator McCain, some Democrats regard the S.E.C. chairman as a convenient receptacle for public fury against corporate miscreants. And in the sense that he helped to scuttle reforms in the past, Mr. Pitt does share responsibility for the current crisis. Yet in those days, he was doing his job as the hired advocate for special interests. Far more culpable are the politicians who paid more attention to the desires of their corporate donors than to the public interest; they deserve to be ousted by their constituents at the first opportunity.
The most offensive are longtime Republican opponents of reform who now seek to blame Fortune 500 malfeasance on former President Clinton. These phonies think they can dupe voters into believing that Mr. Clinton’s dalliances with Monica Lewinsky mesmerized corporate executives and directors into falsifying their profits. They prattle about a “culture of corruption.”
In fact, the Clinton administration repeatedly tried to restrain corporate excess and was repeatedly rebuffed by the Republican majority on Capitol Hill. With his boss’ support, Arthur Levitt Jr., the Clinton administration’s S.E.C. chairman, fought to outlaw the kind of conflict-ridden relationships that accountants like Arthur Andersen enjoyed with crooked clients like Enron. For years Mr. Levitt, an extraordinary advocate for small investors, warned about the “half-truths” and “accounting sleights-of-hand” that threatened public confidence in American financial markets.
Republicans were not alone in frustrating those efforts-and others to close offshore tax havens-but they were the most effective and powerful opponents of Mr. Levitt. And they relied on the arguments conjured by Mr. Pitt, then working for the accounting industry, to prevail.
Yet revenge for his past role seems pointless and possibly destructive now. Paul Sarbanes, the smart, progressive Maryland Democrat who chairs the Banking Committee, has refrained from demanding Mr. Pitt’s head. To replace the S.E.C. chairman, Mr. Sarbanes noted on Meet the Press , would take months that the nation cannot afford. He even praised the S.E.C. chairman for doing “some very strong, positive things,” while adding that Mr. Pitt has “been slow to pick up on other things.”
For his part, the S.E.C. chairman said on the same broadcast that he would support the stringent legislation pushed by Mr. Sarbanes-a startling change from administration policy, and a sign that he knows he can no longer protect his corporate friends and keep his job. He must be pushed hard to do more, with voices like Mr. McCain’s keeping him honest. There will be plenty of time to expel Mr. Pitt if he fails.