SEC Chairman Harvey Pitt Resigns

The Bush administration today began the search for a new financial regulator after Harvey Pitt, the gaffe-prone chairman of the securities and exchange commission (SEC), resigned.

Mr Pitt stepped down as head of America's financial watchdog after a tumultuous 15 months, as a rash of scandals from Enron to WorldCom undermined public confidence in corporate America and Wall Street.

From the beginning of his time as head of the SEC, Mr Pitt laboured under the initial handicap of being considered too close to the industry he was supposed to regulate. The final straw came last week over the fiasco surrounding the appointment of the head of a new accountancy supervisory board, a cornerstone of legislation designed to clean up Wall Street.

William Webster, the former head of the Central Intelligence Agency and the Federal Bureau of Investigation, was appointed by a deeply divided SEC as head of the public company accounting oversight board.

Even before Mr Webster's selection, the process turned into a quagmire for Mr Pitt, who was accused of caving in to the accountancy lobby when he backed away from the early favourite, John Biggs, the highly respected and independent 66-year-old head of the TIAA-CREF pension fund.

Mr Pitt's problems became terminal when it emerged that he had failed to inform the other four commissioners that Mr Webster had served on the audit committee of US Technologies, a company that was subject of allegations over its accounting practices. Democrats called for Mr Pitt's resignation and Mr Pitt found himself in the embarrassing position of having to call for an SEC investigation into the whole episode.

"It is with deep regret that I have decided to tender my resignation to you as chairman, and a member of the securities and exchange commission, effective as soon as I can help your staff ensure a smooth transition of leadership," Mr Pitt said in a letter to the president, George Bush.

Mr Pitt's departure was widely expected by the markets, where the focus was very much on the midterm elections, with the Republicans taking control of both the House and the Senate.

For markets, "the real issue is the election", said Arnie Owen, managing director of equities at Roth Capital Partners in New York. "The Pitt issue has been going on for a couple weeks ... I don't think it will matter for the markets."

Names that have been mentioned as possible successors include a former top SEC lawyer, James Doty, a corporate lawyer, Gary Lynch, and the a former federal judge, Stanley Sporkin.