“The Securities and Exchange Commission is considering more regulation of the nation’s credit-ratings agencies, which failed to spot the financial weaknesses that brought down Enron Corp., writes Michael Schroeder in today’s Wall Street Journal.

“At the same time, the SEC chairman cautioned lawmakers against restricting certain business practices of accounting firms such as Arthur Andersen LLP, which audited Enron.”

“SEC Chairman Harvey Pitt, testifying before the House Financial Services Committee, said he opposed banning accounting firms from providing nonaudit consulting services to their clients, a move that his predecessor at the SEC has strongly supported. ‘Stripping down accounting firms so that they only produce audits will result in worse audits,’ Mr. Pitt said.”

“Meanwhile, the Bush administration indicated that it would back legislation to create a strong, private board to regulate and discipline the accounting industry.”

“In a day of hearings centered on financial institutions and their role in Enron’s collapse, the SEC took center stage, arguing that credit-rating agencies such as Moody’s Investors Service Inc. and Standard & Poor’s Ratings Group, should have spotted the Houston company’s shaky financial condition much earlier.”

” ‘We believe it is an appropriate time and in the public interest to re-examine the role of rating agencies in the U.S. securities markets, and to conduct a public examination of the potential need for greater regulation in this area,’ an SEC commissioner, Isaac Hunt, said.”