“The resignation of Harvey L. Pitt from the Securities and Exchange Commission will set back by months the efforts of the agency to clean up Wall Street, provide vigorous oversight of the accounting profession and impose tougher regulations on company directors, government officials and corporate law,” writes Stephen Labaton in today’s New York Times.

“Even before Mr. Pitt’s announcement on Tuesday evening that he would step down as the commission’s chairman, the agency faced difficult challenges. It has suffered huge morale problems and high turnover among its more experienced staff, whose pay was lower than that of officials from other federal agencies. And although its mission was enlarged substantially this summer when Congress adopted the Sarbanes-Oxley Act of 2002, authorizing a 77 percent increase in its budget, the financing has remained in doubt because the White House has wavered over its commitment for such a large increase.”

“Moreover, Mr. Pitt’s choice to head the new accounting oversight board, William H. Webster, has said he is reconsidering whether to head that board in light of the disclosure that he headed the audit committee of a virtually insolvent company facing accusations of fraud. Should Mr. Webster step down, as some top officials today predicted, the vacancy would not be filled until after the commission gets a new permanent chairman, a process that will take months.”

” ‘The agenda of the Securities and Exchange Commission is in shambles right now,’ said Donald C. Langevoort of Georgetown University, a former commission official who is an authority on securities and corporate law. ‘Simply responding to the demands of the Sarbanes-Oxley Act and the corporate scandals was a massive management task. Now the commission has to go through a new search for leadership, and the accounting board probably will, too. This has to be a great setback.’ “

“The timing of the S.E.C.’s growing problems could hardly be worse. Investors have been looking to Washington all year for leadership to calm the markets and take steps to avert more corporate scandals.”

“Professor Langevoort said that with both chambers of Congress now under the control of the Republicans, he could imagine that the corporate and accounting interests that tried to beat back some of the more onerous provisions of the Sarbanes-Oxley bill would try to water it down next year.”

” ‘Harvey had to resign given his many missteps and misjudgments,’ he said. ‘But given the current set of circumstances, it is entirely possible that three months from now we may wish we had him back. I’m not optimistic about the ability of the S.E.C. to provide the leadership the markets need unless it gains a very strong chairman quickly.’ “

http://www.nytimes.com/2002/11/07/business/07PITT.html