It seems Harvey Pitt can take a hint. After months of controversy and repeated calls for his ouster, the embattled Securities and Exchange Commission chairman submitted his resignation yesterday.
In his 15 months as the country's chief securities cop, Pitt came to symbolize "politics as usual" (or worse) during one of the most severe crises of confidence in the public markets.
As a private attorney before taking over at the SEC, Pitt represented the major accounting firms (and their lobbying group), Ivan Boesky in the 1980s, and MicroStrategy Inc.(Nasdaq: MSTR) CEO Michael J. Saylor. Should anyone paid millions by various members of Wall Street be expected to regulate it without undue influence? Pitt proved that's too much to ask.
In his first speech as chairman, Pitt made conciliatory comments toward the accounting industry. He said in an interview that he would make the SEC a "kindler, gentler" place. (That's what we need: People like Ken Lay and Bernie Ebbers to be treated more kindly and gently.)
As the Enron and WorldCom scandals unfolded, Pitt didn't react quickly enough. He met privately with the executives of companies being investigated by the SEC. According to The Washington Post, when Congress began drafting legislation that would increase corporate and accountant accountability, Pitt told Republican members that new legislation was not needed.
The coup de disgrace came with the appointment of the head of the new accounting oversight board. Former TIAA-CREF chief John H. Biggs, an outspoken critic of current accounting practices, seemed to be in line for the job. But Pitt -- reportedly bowing to pressure from accounting firms -- instead chose former CIA and FBI director William Webster. The appearance of outside influence and Webster's lack of experience brought enough bad publicity. Then it was revealed that Webster does have some experience -- as a member of the auditing committee for a company under investigation for fraud while the auditing committee allegedly dismissed the outside auditor that raised questions. Pitt knew this but didn't tell the other SEC commissioners, reportedly on the advice of long-time business associate and now chief accountant Robert K. Herdman.
With Pitt gone, what's next? Webster has said he won't keep the position at the oversight board if the controversy will impede the board's work. And look for other members of Bush's economic team to resign.
As for Pitt's replacement, there's little word from the White House. Whoever gets the job will have to contend with an all-time low SEC public approval rating, according to a poll by RoperASW conducted before Pitt's resignation. Worse still, he or she will face a legion of shady corporate and accounting practices that, despite all the political puffery, are still allowed to undermine the credibility of the public markets.