Editorial: Bush needs to take lead on reforms

Thursday, Nov. 14, 2002 | 9:09 a.m.

On Wednesday Federal Reserve Chairman Alan Greenspan sounded cautiously upbeat about prospects for a U.S. economic recovery, but he also warned that it may not be vigorous if concerns continue to linger about corporate accounting scandals. Investor confidence momentarily was restored a few months ago after President Bush signed into law reforms to provide greater oversight of the accounting industry. But that confidence evaporated as Securities and Exchange Commission Chairman Harvey Pitt didn't show that he was serious about reining in accounting abuses.

Pitt's problems intensified last month when he pushed the candidacy of William Webster to take over a new accounting oversight board, one of the key provisions of the accounting reforms. But Pitt failed to tell fellow SEC commissioners that Webster previously headed the auditing committee of a company facing fraud accusations. Finally Pitt resigned a week ago -- a few months late and after considerable loss of investor confidence -- because of the controversy over Webster's appointment. This week Webster resigned, just two weeks after his appointment. At least Webster had the good sense to not let the controversy fester.

President Bush, along with Republican congressional leaders, initially opposed the legislation to provide greater oversight of the accounting industry. Ultimately, Bush went along with the reforms, but only after public pressure grew so intense that he had no other choice. This is a critical time for the White House, especially since there are reports that the SEC is in turmoil following the upheavals at the agency. The president should quickly find someone to run the SEC who won't do the bidding of the accounting industry. The new chairman of the accounting oversight board will have to be someone who is respected and doesn't have any blemishes. The president needs to make it clear that the interests of investors, not those of the accounting industry, are paramount.