Updated from 7:58 a.m. EDT
Harvey Pitt's resignation from the
Securities and Exchange Commission
leaves the office of the nation's top securities regulator vacant at a crucial time for the agency, as it grapples with public distrust and an evolving corporate landscape.
Pitt tendered his resignation just as polls were closing across the country Tuesday, saying the firestorm of controversy surrounding his tenure as SEC chairman was impairing the commission's ability to operate effectively. While Pitt's departure after 15 months of almost continuous turmoil is a relief to the Bush administration, it leaves corporate America without moral direction at a time when public frustration with accounting and corporate governance scandal is at an all-time high.
But those considerations were secondary to Pitt's concern that the SEC was being hamstrung by the controversy, particularly after it was revealed two weeks ago that he had withheld potentially damaging information about William Webster before the former FBI chief was elected to an accounting oversight board.
"Unfortunately, the turmoil surrounding my chairmanship and the agency makes it very difficult for the commissioners and dedicated SEC staffers to perform their critical assignments," Pitt wrote in his letter of resignation to President Bush. "Rather than be a burden to you or the agency, I feel it is in everyone's best interest if I step aside now to allow the agency to continue the important efforts we have started."
The urgency of the situation is reflected in the names being mentioned as Pitt's successor: former New York Mayor Rudy Giuliani, former SEC prosecutor Gary Lynch, and former SEC counsel James Doty -- moral exemplars all.
Another potential contender is Mary Schapiro, the president of regulatory policy and oversight for the NASD. Schapiro is respected in the securities industry and has taken a lead in making the NASD a more aggressive regulatory agency. Schapiro's office is also playing a role in the ongoing global settlement talks going on with nearly a dozen leading Wall Street firms, the SEC and New York Attorney General Eliot Spitzer.
Pitt's move came just as polls were closing across the country, a piece of timing that had the advantage of sparing the Bush administration further embarrassment heading into key congressional elections. Pitt said the resignation would be effective "as soon as I can help your staff ensure a smooth transition of leadership."
White House spokeswoman Claire Buchan said Bush accepted Pitt's resignation. "We did have indications he was considering this over the last couple of days," Buchan said. There was no immediate word on a successor.
reported that three Bush administration officials, speaking on condition of anonymity, said the White House welcomed the resignation because the former litigator had created political problems for the president leading up to Tuesday night's elections.
Dissatisfaction with Pitt peaked last week with a revelation that he failed to tell fellow commissioners potentially damaging information about William Webster, the newly appointed chairman of an accounting industry oversight board, before his election was voted on.
The revelation led SEC commissioners, including Pitt, to request an internal investigation Thursday of Webster's selection -- and renewed calls for his resignation.
Webster, a former federal judge, served on the audit committee of
, a financially troubled company that's facing fraud accusations.
Pitt's decision to withhold the information may have influenced the outcome of the SEC's divided 3-2 vote a week ago in favor of Webster. Pitt and the other two Republicans on the commission backed Webster, while the Democrats on the SEC favored John Biggs, the former head of the TIAA-CREF teachers' pension fund.
Biggs, a longtime critic of the accounting profession, was seen as the front-runner for the chairmanship until some of the nation's accountants began squawking. Pitt's critics contend he bowed to industry pressure in not nominating Biggs to the post. Pitt has denied the charge.
For Pitt, the controversy marked another self-inflicted stain on his reputation. Some said it was inconsistent with the kind of openness the SEC is demanding of publicly traded companies and was another example of him caving to accounting interests.
"It shows a complete lack of judgment and appreciation for the concept of full disclosure," said J. Boyd Page, an Atlanta securities lawyer.
But more importantly, it cast a big cloud over the job faced by the five-member Public Accounting Board, which is supposed to police the accountants who audit the books of the nation's corporations.
The new board was the centerpiece of the Sarbanes-Oxley corporate reform law passed this summer in the wake of the corporate fraud and accounting scandals at
, among others. Lawmakers hope the new board will help restore investor confidence in corporate bookkeeping and ultimately the stock market.