Updated from 4:45 p.m. EST

President Bush is turning to William Donaldson, one of Wall Street's elder statesmen and a longtime family friend, to help resuscitate the Securities and Exchange Commission's credibility with investors.

In a hastily scheduled White House event Tuesday to announce the Donaldson nomination, Bush said the 71-year-old investment banker will be a vigorous opponent of corporate corruption.

Donaldson is being tapped by the White House to succeed outgoing SEC Chairman Harvey Pitt, who resigned last month amid a storm of controversy over a series of political missteps and his initial slow response to Enron and other corporate accounting scandals.

One of Donaldson's strong suits is a long resume that includes Wall Street, corporate America and the federal government. While Donaldson is best known as being one of the founders of the New York investment bank Donaldson, Lufkin & Jenrette, he's also been chairman of both the New York Stock Exchange and Aetna ( AET), the big U.S. health insurer.

Another is his ties to the Bush family. At Yale, Donaldson roomed with the younger brother of the elder George Bush, Jonathan, and his first job out of college was working for a Bush great uncle, according to an autobiography by former partner Richard Jenrette. All three, George Senior, George W. and Donaldson, are members of the semi-secret Yale society Skull & Bones.

Donaldson also has experience working for the government, serving as special counsel to former Vice President Nelson Rockefeller and as an assistant to former Secretary of State Henry Kissinger during the Ford administration. The Bush administration is now populated with veterans of former President Gerald Ford's brief two-year term.

The securities industry was quick to applaud the nomination. Marc Lackritz, president of the Securities Industry association, a Wall Street trade group, said Donaldson is a "superb choice" because "he knows the markets, he knows Wall Street, and most importantly, he knows how important it is to protect investors and to maintain their trust and confidence."

John Harris, a New York attorney who often defends securities industry employees in regulatory cases, said it appears the president wanted someone with "a lot better instincts" than his predecessor.

But already some investor advocates are questioning whether the longtime Wall Street investment banker has the mettle to stand up for investor interests at a time when the stock market is just beginning to recover from a wave of corporate accounting scandals.

"I guess he doesn't want an effective SEC," said New York securities lawyer Jonathan Kord Lagemann, a former general counsel for a small brokerage firm who now represents investors. "He's too wedded to the industry. I think it is a mistake not to appoint a neutral."

Donaldson's selection comes at a critical time because the SEC and state securities regulators are in the final leg of negotiating a sweeping regulatory settlement with a dozen Wall Street firms, including Goldman Sachs ( GS), J.P. Morgan Chase ( JPM), Citigroup ( C), Credit Suisse First Boston and Morgan Stanley ( MWD).

A deal to resolve the many investigations into some of Wall Street's unsavory business practices could be announced as early as next week.

Investor advocates say they will be looking for Donaldson to demonstrate that he can take a tough line with his friends on Wall Street.

"He has to become a vigorous watchdog for investors," said Nancy Smith, a former SEC official and founder of the investor group RestoretheTrust.com. "We don't know whether he will do that."

To some degree, Donaldson's selection comes as something of surprise. He had not been one of the names rumored to be under serious consideration by the White House.

Indeed, most of the other candidates said to be on the short list were either securities lawyers or securities regulators.

But it appears that the Bush administration wanted to go in a different direction and pick a nonlawyer, possibly to put as much distance as possible between the new nominee and Pitt.

The outgoing SEC chairman came to the job with a reputation as hard-nosed securities attorney. But that reputation proved his undoing, as Pitt turned out to be politically tone deaf in understanding the ways of Washington and the full impact Enron and other corporate scandals have had on investor confidence.

Pitt's fate was sealed after his botched handling of William Webster's nomination to lead a new accounting industry oversight board. The debacle not only forced Pitt to resign, but resulted in Webster, a former director of the Federal Bureau of Investigation, also stepping down.

Indeed, one of Donaldson's first tasks, if he's confirmed by the Senate, will be to find a new chairman of the accounting oversight board. The new board is the centerpiece of the Sarbanes-Oxley corporate reform bill, which was passed in the aftermath of the Enron scandal.

Investors seemed to like the news of Donaldson's nomination with the market rallying on the day. The Dow Jones Industrials rose 100 points to 8,574.

In many ways, Donaldson -- despite being nearly two decades his senior -- has much more in common with the president than Pitt does. Donaldson co-founded DLJ in 1959 with two classmates from the Harvard School of Business. He was chief executive of DLJ until 1973 and played an instrumental role in helping the firm become the first major investment bank to sell shares to the public. DLJ was acquired in November 2000 by CSFB, a division of Credit Suisse Group ( CSG).

Donaldson currently runs Donaldson Enterprise, a New York money management firm.

Donaldson gained hands-on experience running companies outside of Wall Street when he became Aetna's chairman and chief executive in February 2000 before stepping down in April 2001. He remained a member of Aetna's board until April.

Donaldson also recently served on the board of Easylink Services ( EASY), a small, New Jersey-based information services company founded by a former DLJ investment banker. Donaldson had sat on the company's audit committee.

In mid-November, just a few days after Pitt announced his Election Day resignation from the SEC, Donaldson announced he was leaving Easylink's board.

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