PITT’S DEPARTURE

Consumer confidence is at a nine-year low. Investor confidence rebounded from a 10-year low apparently only to gather momentum for a new plunge. Harvey Pitt was left with little choice but to resign last night as chairman of the Securities and Exchange Commission.

It would be unfair to blame Mr. Pitt for this economic calamity; it would be unrealistic to credit a public official so ineffective with so much damage. The befuddlement that defined his approach to ensuring honest and understandable financial markets did a lot to explain why investors were so fed up.

Prime evidence of Mr. Pitt’s unsuitability for the job he held was his failure to advance accounting reform. The public and Congress clearly demanded change in the corrupt practice that spawned Enron and all its progeny. Mr. Pitt stood virtually alone in opposing meaningful change.

A key to this reform is the new SEC oversight board for the accounting profession. True reformers on the SEC wanted this board led by John Biggs, a tough and experienced advocate of no-nonsense accounting. The accounting industry, worried that Mr. Biggs would upset the cozy and profitable relationships that have developed between auditor and client, prevailed on Mr. Pitt to find someone less disruptive.

That person was found in William Webster, the 78-year-old former CIA and FBI director, whom Mr. Pitt pitched a person of stature and integrity without close connections with the accounting industry. Mr. Webster, it turned out, had connections: he was a member of the board of directors of U.S. Technologies, a company now nearly insolvent and under investigation. Further, he was a member of the board’s audit committee that fired the company’s auditors in 2001 after they raised concerns about bookkeeping practices.

Mr. Webster says he was unsure whether this should have disqualified him from the SEC post: He told Mr. Pitt about it and left the decision of to him. The decision Mr. Pitt made was to keep this damaging information from his fellow SEC commissioners before they voted on this appointment last week. Having been voted in by deception, Mr. Webster should resign. Having caused that deception Mr. Pitt had to as well.