The demise of the competitive process in the options industry will have to wait until Thursday. Watching and reading about the Enron investigation, the public accounting nightmare, and the bleating of the regulators and Congress, requires some comment. Especially galling was the interview last Thursday night on CNBC with former SEC Chairman Arthur Levitt, where he self-righteously boasted that he had warned us about all these abuses. Some members of the congressional committees and the current administration have had similar moments.
     
By way of background, Arthur Levitt was SEC Chairman during most of the Clinton years, being appointed by President Clinton in July 1993, and serving until last year. In July 1999, Mr. Levitt became the longest serving SEC Chairman. He is generally considered to have been an investor friendly SEC Chairman, and will point to several achievements, most notably Regulation FD, requiring full disclosure of corporate financial information, and the archiving of corporate reports for investor use on the SEC web site as proof. In the CNBC interview last week, he spoke of the need for more independent representation on corporate boards, the inherent conflict between the auditing and consulting functions at public accounting firms (which he would have done something about if not for the knaves in Congress), and the need for federal oversight of the auditing functions of accounting firms.
   
Get off it, Arthur! I feel the same way regarding these platitudes as I once did about a speech by another well-respected, grandfatherly type named Dwight Eisenhower. When I was in high school, and very concerned about the widening Vietnam conflict, there was a flurry of research being done regarding the history of conflict in the region and what influence various groups in the U.S. were having on government policy. I came across a rather famous speech by Ike near the end of his term where he eloquently warned of the rise of the military-industrial establishment in this country and their increasing influence. Damn it, Ike! You were the respected President for eight years, and with your resume and record no one knew more about the thieves feeding at this trough than you. Yet you chose the path of least resistance, a non-controversial presidency with lots of golf, and upon leaving drop this huge concern on the population like a bomb. Why didn't you go public with this problem while you were there, and shout, name names, kick butt, and take prisoners like you did in Europe? Had it become too easy to just go along and lob a toothless concern out every once in a while, so the record showed your knowledge of the problem? A lot easier than pointing out loudly that Senators X,Y, and Z had taken huge contributions from firm A and rammed some unneeded weapons program through committee B.
   
Let's see, Mr. Levitt, we should add more independent board members to the boards of corporate America. Hard to argue with, especially if your desire is to create less unemployment in the old boys network. The problem is that people are not like atomic fuel achieving critical mass. If the current independent board members do not possess the combination of principles and backbone to stop the abuses and actually work for the shareholders, adding one or two more of the same ilk will not somehow create principle and backbone. It's really very simple, someone at Disney needs to resign from their board and shout very loudly, "I will not be a party to paying this Chairman this kind of money after paying two guys he hired to leave, and with the firm doing this poorly". Or someone at Mattel, "I will not be a party to paying a failed Chairman this kind of money to leave". Or Enron, "All these partnerships seem like smoke and mirrors, I will not approve what I don't see the need for". What you are missing, Mr. Levitt, is that the process has become corrupt. Fighting about your idea of more independent board members will take years, and even if your solution prevails the chairman will simply pick and corrupt one or two more "team" players. It will accomplish nothing but your personal feelings that you have addressed the issue somehow.
    
You, Mr. Levitt. said in your interview that you were stopped by Congress in pursuing your concerns about accounting firms doing auditing and consulting. You said some legislators even threatened to cut your funding if you persisted. Trying to promote other business while doing an audit is, to me at least, about as obvious a potential conflict of interest as can be imagined. If you are speaking the truth, I want to know the names of the legislators and dates of these threats. You cannot blame someone else for the cause of your inaction, and then say those responsible will go nameless.
   
The solution, then, is to have more oversight by the SEC. Interesting, seeing that at the present time there isn't much of a SEC. The new Chairman, Harvey Pitt, is an attorney who used to represent, among others, Arthur Anderson. On what topic did he represent them? You guessed it, that there was no conflict of interest between hawking consulting business while also providing the audit function for the same firm. Also, of the remaining four positions, only one was officially filled until recently, with no other new commissioners being nominated during George Bush's first year in office until last week. With the market falling precipitously in the previous year amid huge public outrage regarding security firms touting of worthless stocks and potential investment banking conflicts, wouldn't you think the SEC would have been a priority? Obviously, not to this or past administrations. What's the old adage, you will always find time to do the things you really want to do.
   
We actually will hear more about Mr. Levitt next time when talking about the demise of the options industry.

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