The game isn't over by any means, but investors are taking a pounding. Wall Street and its allies in Washington have managed to blunt almost every attempt at reform. Despite the public's anger at CEOs, Wall Street analysts and the big accounting firms, the Street has successfully defended the very profitable status quo. The score so far is Wall Street 6, investors 0. And here's how Wall Street has scored its points:
Replace Harvey Pitt, a Securities and Exchange Commission chairman with a compromising history of lobbying for the accounting industry, with William Donaldson, a Wall Street insider. As head of the New York Stock Exchange, Donaldson argued for less disclosure by listed foreign companies. Donaldson has called Regulation FD -- the SEC's new plan for guaranteeing individual investors equal access to information -- a terrible rule. The SEC disciplined the NYSE for front-running by floor brokers who traded ahead of client orders, a practice that began while Donaldson headed the exchange.
Set the new independent public accounting oversight board adrift without a leader or funding. William Webster, Harvey Pitt's choice to head the body, has said he'll resign before the board's first formal meeting on Jan. 6. And while the search for a replacement grinds on, the board has fallen behind in such critical areas as setting up a way to collect fees so it can pay its bills. Congress gave the board the power to write new rules for corporate auditors or to defer to rules written by the accounting industry. The current leaderless board has said it will begin business by accepting current industry rules.
Increase funding for the SEC but not enough to put real bite in the regulations. Democrats on Capitol Hill took President Bush to task after he proposed a meager $70 million increase to the SEC budget for the fiscal year that began on Oct. 1. Bush raised that figure to $770 million -- the amount Congress had authorized -- when he nominated William Donaldson. But that still leaves an agency that has to police 17,000 public companies, 34,000 investment companies, 8,000 brokerage firms and 7,500 financial advisers. And it still leaves the SEC as a profit center for the federal government, because it collects $2 billion in fees each year.