New S.E.C. Chief Named
nytimes.com
December 11, 2002
By STEPHEN LABATON
WASHINGTON, Dec. 10 — President Bush turned to Wall Street today and selected William H. Donaldson, a former head of the New York Stock Exchange, founder of a successful brokerage firm and longtime friend of the Bush family, to be the next chairman of the Securities and Exchange Commission.
At the same time, the president made a policy U-turn on the budget of the cash-starved agency and announced he would support an increase for 2004 that he said would be "nearly double" last year's budget.
Aides said it would be even more than the $776 million that had been authorized for the current fiscal year, but never received. Two months ago, White House officials said they would urge Congress to provide the agency with $568 million, or 27 percent less, than was initially voted by Congress and signed by the president.
Mr. Bush's selection of Mr. Donaldson and his announcement of the proposed budget increase seemed to be aimed at ensuring that the commission regains its footing by the 2004 elections. The moves came after sharp criticism from lawmakers and experts that the agency's turmoil had been caused by a leadership crisis, White House neglect and a lack of resources and staff.
The appointment of Mr. Donaldson, which is subject to confirmation by the Senate, was endorsed today by prominent members of both parties. It came five weeks after Harvey L. Pitt announced his resignation in the wake of a series of political blunders. His final misstep, the mishandling of the selection of a new accounting oversight board, also prompted the resignations of his choice for the chairman of that board, William H. Webster, and of Robert K. Herdman, the S.E.C.'s chief accountant, who had been handpicked by Mr. Pitt.
Mr. Donaldson, 71, is a well-known figure on Wall Street, and a founder and the first dean of the management school at Yale University. Like many other top appointees of Mr. Bush, he served in the Nixon and Ford administrations.
The administration has been reshuffling its economic team, dismissing senior officials and refilling their jobs. Officials say Mr. Bush is close to selecting the next head of the National Economic Council, but the president has delayed making an announcement, opening the door to criticism of the leading candidate, Stephen Friedman, from some who see him as insufficiently committed to tax cuts.
On Monday, the president selected John W. Snow, chairman of the CSX Corporation, to be the next secretary of the Treasury.
In contrast to Mr. Pitt, a figure widely regarded as combative who made many enemies in Congress, Mr. Donaldson is seen as more polished, and his previous government service includes a diplomatic stint as an under secretary of state.
He is also an old friend of Mr. Bush's father and of his uncle, Jonathan Bush, whom he met when they were undergraduates at Yale. His first job on Wall Street was at the brokerage firm G. H. Walker & Company, which was run by Herbert Walker, the uncle of the first President Bush.
Mr. Donaldson faces a panoply of significant regulatory decisions in the coming months that affect every aspect of corporate governance. If confirmed as the S.E.C.'s 27th chairman, he will lead the agency as it settles on new rules governing corporate lawyers, accountants, directors and stock analysts. But little is known of his views on the issues before the agency.
Commission officials say that even before his confirmation hearings, expected to take place early next year, he will be consulted by the other commissioners who want to quickly select the head of the board overseeing the accounting profession, which is supposed to have its first official meeting early next month. Mr. Donaldson formally began the process by calling each of the commissioners this morning and introducing himself.
Mr. Donaldson said little today about his specific policy priorities after the year of corporate scandals and market turmoil.
"Confidence in the U.S. corporate and financial industries has been seriously eroded during the past few years," he said in a brief appearance with Mr. Bush in the Roosevelt Room of the White House. "Corporate managers, boards of directors, operators, regulators of our financial markets, as well as those who advise, including bankers and lawyers and accountants, must be constantly mindful of the trusts that shareholders have placed in them. Each of us must take that trust seriously."
"As my mother used to say many years ago, it's time for all of us to pull up our socks," he concluded.
Experts on securities regulation who follow the commission closely expressed relief that Mr. Pitt, who has remained at the agency to ensure what he called a smooth transition, would soon be leaving.
They could not predict the direction Mr. Donaldson would take the commission because his views on crucial issues now confronting it are largely unknown. He has never spoken publicly about many issues before the agency and, following the tradition of presidential nominees, he said today that he would not comment until after his confirmation hearing on what he hopes to accomplish.
"The intangibles about him are probably the most important factors that will determine whether he is successful," said James D. Cox, a professor of securities and corporate law at Duke University. "He has to earn the confidence of both parties on Capitol Hill. He has to affirm to the staff that what they are doing is important. We need a person with a strong public image, not only for the integrity of the capital markets but for the agency itself."
Joel Seligman, a leading authority on securities law and a historian of the commission, said that the biggest single issue confronting Mr. Donaldson was the "leadership crisis" at the S.E.C.
"We need a grown-up leading the commission, a person who can reduce the partisan animosity which has gotten in the way of the commission's ability to do its job," said Mr. Seligman, the dean of the law school at Washington University in St. Louis.
On Capitol Hill, the appointment was endorsed by leading Republicans and Democrats.
"Bill Donaldson has a proven track record in turning around difficult situations," said Representative Michael G. Oxley, the Ohio Republican who is chairman of the House Financial Services Committee and had been one of Mr. Pitt's most important allies in Congress. "His understanding of Wall Street dynamics and his experience in both the private sector and as a securities regulator make him a first-rate choice for S.E.C. chairman."
Senator Charles E. Schumer, Democrat of New York, said Mr. Donaldson "is a good appointment."
"If you had two criteria for the job, a knowledge of how the markets work and a reputation for integrity, Donaldson's got both of those," he said. "He has not been intimately involved in the day-to-day operations of Wall Street, so he will not defend its existing practices. He's not wedded to them. But he has an appreciation for how markets work."
Other Democrats offered a more cautious assessment.
"Arthur Levitt proved that you can come from industry and still be a pro-investor regulator," said Representative John D. Dingell of Michigan, the ranking Democrat on the House Energy and Commerce Committee, referring to Mr. Pitt's predecessor. "I can only hope Mr. Donaldson proves the same."
A native of Buffalo, Mr. Donaldson was a member of Skull and Bones, the Yale secret society. In 1959, he and two school friends became founders of Donaldson, Lufkin & Jenrette, which grew from a tiny firm into the 10th-largest brokerage house when he left in 1973.
He left Wall Street for Washington to become an under secretary of state under Henry A. Kissinger. He then served as counsel to Vice President Nelson A. Rockefeller. After leaving government, he was a founder and the first dean of the Yale University School of Management, and in the early 1990's he served as chairman of the New York Stock Exchange. Last year he retired from Aetna, where he was briefly chairman, president and chief executive. |
