Securities and Exchange Commission Historical Society

Regulating the Regulators: The Executive Branch and the SEC, 1981-2008

George W. Bush Administration

Pitt Commission

Fall 2002 SEC Commission:  Paul Atkins, Cynthia Glassman, Harvey Pitt, Harvey Goldschmid and Roel Campos

The continuing efforts to reduce the size of government and its impact on a growing and increasingly complex financial industry came to a climax in the George W. Bush Administration, exposing both the promise and the practical effects of financial deregulation.

President Bush chose Harvey Pitt, former SEC General Counsel and a leading securities practitioner, as SEC Chairman.  Within a month of taking office, Pitt faced the attacks of September 11, 2001 on the United States.  As the World Trade Center towers fell in New York City, the impact on the securities industry was dramatic. Most of the Wall Street area had no utilities or communication services and was covered in debris. Several billion dollars of physical securities were destroyed.  The Seven World Trade Center building, which housed the SEC New York Regional Office, later collapsed with no fatalities.  “The most extraordinary thing that Harvey did … is that he sized up the situation quickly and said, ‘The people who are best equipped to handle this are Dick Grasso and the broker-dealer community, the financial community,’ and he got the hell out of the way.  If you know Harvey, he doesn’t get the hell out of the way very easily, and it was one of the finest things he ever did.  He managed an agency response that was extraordinarily constructive and useful.”  Pitt worked to ensure the reopening of the markets on September 17th and the resumption of the SEC New York Regional Office’s work, recalling that “it was a proud moment for the agency when, in October 2001, the Commission became the first federal agency to move back into New York’s financial district, a stone’s throw from Ground Zero.52

But Pitt’s handling of the markets in the aftermath of 9/11 proved to be the high point of his Chairmanship.  In late 2001, disclosures of accounting fraud by Enron, and then WorldCom and Tyco in 2002, brought into focus problems within the accounting industry.  Pitt’s representation of the industry in private practice appeared to be a detriment in the SEC’s response. “I think Harvey came in focusing on trying to relieve the pressure on the accounting industry, and didn’t focus enough about the fact that there was a serious accounting problem…and did not react to the broader need, did not see the broader need.” Pitt drew fire for refusing to recuse himself from SEC enforcement cases involving companies and accounting firms that were once his clients.53  

President Bush looked to the SEC to implement a response to the accounting scandals, without the need for legislation.  But Democrats in Congress argued that a response without legislation would be inadequate.   As 2002 was a midterm election year, “there was enormous concern in the White House and among Republicans that this crisis was going to damage their chances in November.”  The subsequent bipartisan Sarbanes-Oxley Act of 2002 was signed into law, prohibiting an accounting firm from providing audit work for a public company while contemporaneously providing a host of other services.  The act required each public company to have an audit committee composed of independent directors, and required attorneys for public corporations to report material violations of law to the corporation’s chief legal advisor and/or the CEO.  “Given the political environment in late 2002, the Commission to a person endorsed Harvey Pitt’s position:  the Commission will do what Congress has told it to do.  We will implement Sarbanes-Oxley.  We will do it in the time frames, which were by and large six months, that Congress has imposed.  ‘Is this is good idea, is this a bad idea?’ disappeared from the conversation.  Congress had spoken.” 54

One of the provisions of the Sarbanes-Oxley Act was the creation of the Public Company Accounting Oversight Board (PCAOB), which would be under the oversight of the SEC.  John Biggs, TIAA-CREF Chairman, had been the Commission’s initial choice to chair the agency.  But Pitt recommended William Webster, former FBI and CIA head, as a candidate without consulting his fellow Commissioners. The selection was debated in an open and contentious Commission meeting, with Commissioners questioning the qualifications and vetting of the candidates, before ending with “a 3-2 vote, the three Republican Commissioners with Chairman Pitt, and Judge Webster was voted as chair.”55

A few weeks later, Judge Webster stepped down from the PCAOB after revelations that he had headed the audit committee of a firm under SEC investigation for accounting irregularities, a fact shared with Pitt before the Commission vote.  The White House, while supportive of Webster’s candidacy, had not been informed of the investigation.  By then, Pitt himself had resigned, mindful that “the [Administration] wasn’t happy with the way he handled things.  He was totally aware that they may replace him.”  Cynthia Glassman reflected, “I think Harvey believed that he hadn’t done anything wrong – which in fact, he hadn’t – and so he didn’t have to explain himself, which he probably should have.  It might have helped.”  Roderick Hills considered, “He has all the capacity in the world.  He certainly has the integrity to deal with it, but I guess you’d have to say he didn’t have the personality to deal with it, and that’s the sad part of it.”  Laura Unger concluded, “He was just the wrong person for the wrong time.”56


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Related Museum Resources

Galleries

The Center for Audit Quality Gallery on Corporate Governance
Wrestling with Reform: Financial Scandals and the Legislation They Inspired
The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

Papers

November 28, 2000
image pdf (Courtesy of the William J. Clinton Presidential Library)
November 29, 2000
image pdf (Courtesy of the William J. Clinton Presidential Library)
December 19, 2000
image pdf (Courtesy of the William J. Clinton Presidential Library)
October 19, 2001
image pdf (Richard K. Armey Papers, courtesy of the Carl Albert Congressional Research and Studies Center, University of Oklahoma, Norman, Oklahoma)
October 29, 2001
transcript pdf (Courtesy of George W. Bush Presidential Library and Museum)
December 7, 2001
image pdf (Courtesy of the National Archives and Records Administration)
December 17, 2001
image pdf (Courtesy of the National Archives and Records Administration)
December 17, 2001
image pdf (Courtesy of the National Archives and Records Administration)
January 16, 2002
image pdf (Courtesy of the National Archives and Records Administration)
January 17, 2002
image pdf (Courtesy of the National Archives and Records Administration)
January 18, 2002
image pdf (Courtesy of the National Archives and Records Administration)
January 23, 2002
image pdf (Courtesy of the National Archives and Records Administration)
February 1, 2002
image pdf (Courtesy of the National Archives and Records Administration)
February 1, 2002
image pdf (Courtesy of the National Archives and Records Administration)
March 20, 2002
image pdf (Courtesy of Kathryn McGrath)
March 21, 2002
image pdf (Courtesy of Kathryn McGrath)
April 2, 2002
image pdf (Courtesy of the National Archives and Records Administration)
April 8, 2002
image pdf (Courtesy of the National Archives and Records Administration)
April 9, 2002
image pdf (Courtesy of the National Archives and Records Administration)
April 30, 2002
image pdf (Courtesy of the National Archives and Records Administration)
June 26, 2002
image pdf (Courtesy of the National Archives and Records Administration)
June 27, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 2, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 5, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 11, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 15, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 17, 2002
image pdf (Courtesy of the National Archives and Records Administration)
July 24, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
August 5, 2002
image pdf (Courtesy of the National Archives and Records Administration)
August 15, 2002
image pdf (Courtesy of the National Archives and Records Administration)
August 16, 2002
image pdf (Courtesy of the National Archives and Records Administration)
August 27, 2002
image pdf (Courtesy of the National Archives and Records Administration)
August 30, 2002
image pdf (Courtesy of National Archives)
October 7, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
October 31, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 1, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 2, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 4, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 5, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 5, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
November 5, 2002
image pdf (Courtesy of George W. Bush Presidential Library and Museum)
June 2, 2004
document pdf (prepared for the museum by Harvey L. Pitt)

Oral Histories

21 May 2015

David Becker

31 May 2013

Alan Beller

13 April 2015

Roel Campos

07 September 2003

Meyer Eisenberg

21 November 2005

Cynthia Glassman

20 December 2002

Roderick Hills

21 July 2015

Isaac Hunt

31 March 2011

Donald Kirk

05 March 2012

William McLucas

04 November 2005

Annette Nazareth

09 March 2012

Michael Oxley

19 June 2015

Fiona Philip

12 May 2008

Harvey Pitt - Part II

07 June 2016

Robert Plaze

06 May 2015

Giovanni Prezioso

21 June 2016

Paul Roye

16 June 2005

Lynn Turner

07 November 2005

Laura Unger

Programs

15 November 2012

A Measured Response?

Moderator: Robert K.D. Colby

Presenter(s): Daniel Goelzer, Peggy Peterson, Dean Shahinian, Linda Chatman Thomsen

16 October 2012

Deloitte Fireside Chat VII: The Profession Looks at Sarbanes-Oxley

Moderator: Mark Peecher

Presenter(s): Alan Beller, Joseph Ucuzoglu

30 July 2012

The Sarbanes-Oxley Act: The First Decade

Moderator: Mark Beasley

Presenter(s): Michael Oxley, Paul Sarbanes

Made possible through the support of the Center for Audit Quality

22 March 2012

Diane Sanger Memorial Lecture

Presenter(s): Harvey Goldschmid

Made possible through the support of the family of Diane Sanger

16 October 2007

Fireside Chat - Sarbanes-Oxley Section 404

Moderator: Theresa Gabaldon

Presenter(s): Kurt Schacht, Herbert Wander

09 June 2005

Crisis and Resolve - The SEC and the Securities Industry Remember September 11, 2001 (Sixth Annual Meeting)

Moderator: Wayne Carlin

Presenter(s): Edward Kwalwasser, Annette Nazareth, Harvey Pitt, Thomas Russo

04 June 2003

Current Issues in Enforcement (Fourth Annual Meeting)

Moderator: Theodore Levine

Presenter(s): Stephen Cutler, Eliot Spitzer

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