ARTHUR ANDERSON’S REVENGE
In case you might have been wondering whether William Webster, despite his lack of technical background in accounting, might still be qualified to head the new accounting-oversight agency, the answer turns out to be “No.” Today’s New York Times reports that he chaired the audit committee of a company company called U.S. Technologies, which fired its auditors for raising questions about financial controls, lied to the SEC about why it had done so, and then promptly collapsed amid charges of fraud.
Webster told SEC chairman Harvey Pitt about the situation, but Pitt decided that the four other members of the SEC didn’t need to be confused by any facts before Webster was chosen on a 3-2 party-line vote over John Biggs. Webster is a corporate lawyer (Milkbank, Tweed) and former Federal appellate judge and FBI and CIA Director. Biggs, an actuary with a Ph.D. in economics, is retiring as head of TIAA-CREF, which manages $280 billion of professors’ pension money. A sample of Bigg’s thoughts on the issues confronting the new board is here.
The accounting industry opposed Biggs, and Pitt appears to have welsched on a commitment to support him for the job. That led the usually restrained Paul Sarbanes, co-author of the law creating the new board, to call for Pitt’s resignation. (You will recall Pitt as the chief lobbyist for the accounting industry in beating back a previous SEC move to decouple accounting from consulting.)
Brad DeLong has been all over this story. (Here, and here, and here.) The mainstream press has been covering it, but not very noisily. Even after Enron, any story with “accounting” in the headline is still regarded as a likely MEGO (My Eyes Glaze Over).
But this latest flillip is just too perfect, and maybe — I’m not betting on it — will convert this into a real campaign issue for the week before election day. It’s the basic Democratic story in its purest form: given a choice between the public interest and powerful private interests, the Republicans followed the money. So far, I haven’t seen anyone on the right side of the blogosphere even try to explain why Webster would be a good choice, or Biggs a bad one. If anyone can offer a good argument for either position, I’ll happily note it.
Brad DeLong quotes a Wall Street Journal editorial more or less calling for Pitt’s resignation. He complains that said editoral, while reaching the right conclusion, is full of lies. Picky, picky, picky.