 |
|
 |
|
 |
|
 |
|||||||||||||||||||||||||||
|
In any case, McCain's he's-a-fine-man-but-he's-got-to-go line seems exactly wrong. Harvey Pitt may be an s.o.b., but nobody has made a good case that he should go. There are three arguments for Pitt's being the wrong man for the job. Let's take them one by one. 1) Pitt is too cozy with the accounting industry, having helped it to fend off needed regulation when he represented it in a previous job. Everybody knew about Pitt's ties to the industry when he was confirmed last year, of course — confirmed on a voice vote, indicating the lack of any opposition to him. Nobody thought this objection made sense before it became politically convenient to do so. Nor does anyone apply it consistently today. Senator McCain is willing to stall judicial nominations in order to get Ellen Weintraub confirmed to the Federal Election Commission. Her previous job? Defending politicians in election-law cases. Note also that this generic charge of softness is not accompanied by any showing or even attempted showing that Pitt has been lax in enforcing the law. The entire debate about Pitt is proceeding in unsplendid isolation from any review of his actual record at the SEC. 2) Because of his ties to the accounting industry, Pitt has had to recuse himself in many cases before the SEC. True (and just imagine what the critics would be saying if he had not recused himself). Did his recusals damage the SEC's ability to enforce the law in any case? The critics haven't even alleged as much. Under the law, he will not have to recuse himself for much longer anyway. 3) Pitt is too anti-regulatory in his policy views. Sen. McCain says Pitt is the wrong man for the job, in part, because he rejects McCain's ideas about stock options and the separation of auditing from consulting. But President Bush doesn't support these ideas either. McCain's problem is with the Bush administration generally. Pitt is just a convenient whipping boy. A
STANDARD MISTAKE Stelzer does, however, put a new conservative spin on all the regulations he favors: Because they will correct the problems that have been brought to light, they will obviate the need for any other regulations. These regulations are therefore "self-liquidating" and, indeed, consistent with "minimal — and effective — government." What set of proposed regulations could not be justified in this fashion? Rarely does anyone proposing regulations say that they will not solve the problems they are meant to address and will thus have to be supplemented by a never-ending stream of future regulations. The most foolish part of Stelzer's analysis, however, comes when he repeats the conventional wisdom about stock options. He writes about "Alan Greenspan's call for [CEOs] to report their share options as the expenses they most certainly are": "I recall a discussion that followed a similar proposal I made several years ago. One CEO said that he couldn't place a value on these options for purposes of reporting to shareholders, even though he could value those same options for the purpose of deducting their cost from his profits for tax purposes." Stelzer should be embarrassed for writing these lines, even though they are similar to what scores of other journalists have said. When a company issues a stock option, it does not know how much that stock option will eventually cost it. It can use models to estimate the cost, but it certainly can't ask the IRS for a tax deduction on the basis of its estimate. Later, when the option is exercised, its exact cost is known and can be deducted from corporate income for tax purposes (although it is then added to the individual's income). Stelzer is eliding the distinction between the issuance and the exercising of an option. But timing is everything in the proposals before Congress. It is widely argued that when companies issue options, they should have to subtract an estimate of their cost in reporting profits. It's not obvious to me that that's the right approach. (When the option is actually exercised, by contrast, the cost is immediately reflected in stock prices.) McCain's bill would limit companies' deductions to that estimate, even if the eventual cost of the option is higher. That means that companies would be penalized for success, and that granting an option would expose it to an unpredictable tax hike. (There would also be double taxation, since, again, the individual's take is taxed.) Later in his piece, Stelzer sneers that McCain's proposal on options "so horrified senators that it has for now been derailed." Maybe the senators just know more about the proposal than Stelzer does. |
|
|
|
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
<% dim printurl
printurl = Request.ServerVariables("URL")%>
ohn McCain
has a reputation for "straight talk," but that's not quite what
he gave us last week. Toward the end of his big corporate-reform speech,
the senior senator from Arizona said that Harvey Pitt, the head of the
Securities and Exchange Commission, should step down: "Simply put,
fine man though he may be, the circumstances today require a new leader
of the SEC whose background and record leave no question that he or she
will proactively assert the independence and authority of the SEC to protect
the integrity of our markets. I hope that Mr. Pitt will continue to serve
our country in another capacity." Oh, please. McCain basically insinuated
that Pitt is corrupt. Are we to assume he meant that seriously, or that
he meant the "fine man" stuff unseriously? 
