White House spin
doctor works at SEC *
An Impeachable offense.
washingtonpost.com
October 14, 2002
When a White House press aide went to work for Securities and
Exchange Commission Chairman Harvey L. Pitt last week, the
immediate interpretation was that Pitt is in big trouble.
The White House, the pundits proclaimed, wants to manage the
media for Pitt so he doesn't do something obtuse and let the Wall
Street financial scandals become a Washington political
issue.
I would argue that the arrival of the White House operative
doesn't mean Harvey Pitt is in trouble. It means all the
investors who count on the SEC to oversee the securities markets
are.
When a White House spin doctor joins the staff of
a supposedly independent regulatory agency, you can bet she's not
there to help the watchdogs do a better job.
Sending Anne Womack to the SEC is a clear signal that politics
is the top priority for the Bush administration and Harvey
Pitt.
Womack has no known expertise in financial markets, no
background in business. She's a young Texan who came to
Washington from the presidential campaign, White House reporters
tell me. What she brings to the SEC is politics, not policy.
Since when does the chairman of a supposedly independent
regulatory agency let the White House plant a political operative
in his office?
The SEC is not a branch of the White House. Pitt is not a
cabinet member who serves at the whim of the president. The
president appoints the SEC chairman but does not have the power
to fire him.
But apparently the president does have the power to assign
someone to shadow the head of an independent regulatory agency.
That can happen, however, only when that agency head is too weak
to fend off the White House functionaries or all too willing to
let them interfere with the agency.
Pitt says Womack was not foisted on him by the White House; he
recruited her. "The fact that her background includes time at the
White House, where she has seen high-pressured communications
issues arise, is helpful," he said, but was not the reason she
was hired.
Whatever the circumstances, "this is the worst possible sign
of confidence that you could give to an agency," said Paul C.
Light, a presidential scholar at the Brookings Institution and an
expert on the workings of the Washington bureaucracy.
"It's like the Minnesota Twins calling up El Duque to come
over and save the game for them because nobody in their own
bullpen can do it," he said.
To Light, moving a White House staffer into the SEC public
relations staff means either that the Bush administration has
given up on Pitt or that Pitt has given up on maintaining his
independence from the White House.
Several SEC employees and alumni said privately that they were
shocked Pitt had gone directly to the White House for help.
The independence of regulatory agencies such as
the SEC used to be considered sacrosanct. During the
savings-and-loan crisis, for example, there was a huge flap over
a White House phone call to the thrift regulators. That alone was
considered inappropriate.
Yet here is the SEC chairman adding a White House
political operative to his staff as if it were a routine
appointment.
Pitt has been his own worst enemy from the day he was
nominated. He was one of Washington's best-known, most-quoted
securities lawyers and long considered a candidate for the top
job at the SEC. But he was also known as the Washington lawyer
for the accounting industry, a group legendary for its political
influence.
Since his appointment Pitt has been fighting a rear-guard
action to protect the SEC's reputation as an effective regulator,
and his own job. He is doing so badly on the employment-security
front that even the Wall Street Journal editorial page is calling
for his scalp.
Democrats in Congress want him out as well. Caught in
crossfire from left and right, Pitt barely knows enough to duck.
Again and again he has been criticized for repeating the same
sin: meeting privately with executives of companies that are
involved in SEC policy and enforcement cases. His most recent
"chat" was with Henry M. Paulson Jr., chairman of Goldman Sachs
Group Inc., which is up to its eyeballs in the issue of analysts
touting stocks of their firms' favored clients.
Disclosure of that meeting was one of the factors that
prompted last week's call for Pitt's head by Senate Majority
Leader Thomas A. Daschle (D-S.D.) and House Minority Leader
Richard A. Gephardt (D-Mo.)
They also accused Pitt of selling out to the accounting
industry over who will head the Public Company Accounting
Oversight Board, an organization Congress created in response to
the accounting scandals.
Until a week ago, it looked like the job would go to John H.
Biggs, who has served as chairman of TIAA-CREF, a pension fund
for teachers and college professors. While most pension funds
worry only about managing their money, TIAA-CREF has long been
activist, pushing corporations on issues including accounting,
executive pay and corporate responsibility.
Biggs appeared to have a mortal lock on the appointment. He
was a straight arrow whose appointment would show Pitt was
committed to doing the right thing, not serving his old
clients.
The Biggs bandwagon was rolling so smoothly that some
reporters wrote stories saying he had the job. Biggs himself was
so confident that he arranged to take early retirement from his
fund.
But on the day that stories broke saying Biggs was in, Biggs
was out.
Biggs was unacceptable to Rep. Michael G. Oxley (R-Ohio),
chairman of the House Financial Services Committee and co-author
of the legislation that created the accounting oversight
board.
That law does not give Oxley veto power over appointments, but
his name is on the legislation and his influence over the SEC's
budget and legislative agenda means he cannot be ignored.
The tawdry influence of congressional committees on the
regulatory process is one of the reasons why accountants became
unaccountable. Their friends in Congress enabled the industry to
head off, hijack or water down every accounting reform proposal
from Washington in the past decade.
Congress intervened on behalf of the accountants and their
clients on two of today's top accounting issues: treating the
cost of stock options as an expense and preventing accounting
firms from doing consulting work for firms whose books they are
auditing.
Sen. Joseph I. Lieberman (D-Conn.) did the bidding of big
business on the stock-options issue. The interference by
Lieberman and so many others in his party is the reason why
Democrats dare not make too much of an issue of Wall Street
reform.
On the auditing-consulting issue, Oxley weighed in on behalf
of the accountants, who also counted Pitt in their camp.
Under the circumstances, it is hard to understand how Oxley
and Pitt got into a public debate over the Biggs appointment. The
way the game is usually played is that when someone like Biggs is
floated for an appointment, the opponents quietly sink him. Even
when it is known that someone is a candidate for a top job, they
can still disappear without a trace.
But Pitt apparently let the Biggs situation get out of
control. Biggs's appointment wasn't killed off in the back room
where such dirty work is usually done; it was done in public,
embarrassing everyone involved.
Oxley ended up as the bad guy, but Pitt comes off as a
bumbler. The Democrats used the incident to bash Pitt and to
repeat their call for his resignation.
White House spokesman Ari Fleischer was forced to respond,
calling the Democrats' demand "an old, tired cry" and "a
political charge that has no merit."
When Pitt has come under fire in the past, it was Womack, one
of Fleischer's assistants, who got the job of defending him.
Pitt says he met and liked Womack and heard she might want to
move on, so he went after her.
"I pursued her because I had been impressed with her
performance," he said in a statement issued by another spokesman.
"Any time I can find a talented, smart and articulate individual
to assist in making sure our various constituencies understand my
views, I would jump at the chance."
He said Womack is "to advise me on making sure the messages I
want to communicate to our constituencies are in fact articulated
as well as I can do so."
If that's what Pitt wants to do, and if his new media maven is
any good, they ought to start by articulating the message that
Pitt no longer does the bidding of the accounting industry.
All they would have to do is call a news conference tomorrow
and announce that Pitt has chosen John Biggs to be chairman of
the Public Company Accounting Oversight Board.
That would be the one move that could rescue Pitt's reputation
as SEC chairman.
The question is whether his new handler is smart enough to do
it or whether her mission is to send the message that politics
still takes precedence at the SEC.
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