I join in welcoming William H. Donaldson this morning before the Committee on Banking, Housing and Urban Affairs. The President has nominated Mr. Donaldson to be a member of the Securities and Exchange Commission and to serve as its Chairman.
The United States securities markets have been an economic asset of our economy and, indeed, the world economy. The Chairman of the SEC plays a critical role in promoting the integrity, strength and efficiency of these markets and inspiring trust and confidence among investors. In my view, protecting investors, ensuring the fairness and integrity of our securities markets and aggressively enforcing the securities laws are primary functions of the Securities and Exchange Commission.
Unfortunately, in the last few years, the securities markets have experienced a significant erosion in public confidence. Investors have seen too many instances of public companies with faulty accounting and inadequate or misleading disclosures, unreliable auditor certifications and analysts giving misleading stock recommendations. As Fortune magazine observed, there were 'Rampant conflicts of interest on Wall Street. Wildly creative accounting. Auditors who didn't audit. Money managers who didn't manage. A stunning lack of oversight by regulators.'
The consequences for American families, for American workers and for investors have been profound. The aggregate value of publicly traded stocks has declined by trillions of dollars over the past three years. State pension plans have been hard hit. Retirees have seen their retirement savings dry up, while millions of working Americans have had to put retirement plans on hold. Tens of thousands of working men and women have lost their jobs - at Enron and WorldCom alone, more than 30,000.
It was precisely to address these and other related urgent problems that the Congress last summer overwhelmingly approved the Public Company Accounting Oversight and Investor Protection Act, which the President signed into law and noted it as being the most far-reaching changes in securities laws since the 1930's.
Now, it is the responsibility of the SEC to promulgate regulations that fully implement the letter and spirit of the new law, to engage in strong oversight of the securities market participants and to vigorously enforce the laws. Clearly, the SEC needs to take decisive actions to restore public confidence.
In addition, the SEC must appoint for the new Public Company Accounting Oversight Board a Chairman, selecting someone, as the statute provides, 'of integrity and reputation who [has] a demonstrated commitment to the interests of investors and the public, and understanding of the responsibilities for and nature of the financial disclosures required of issuers . . . and the obligations of accountants with respect to the preparation and issuance of audit reports.' This is a very important decision and will define the new Chairman and Commission.
Further, the morale of the Commission and its staff must be restored. It now appears that increased funding for the SEC will be forthcoming. But leadership will be required to restore the SEC to its historic place as the crown jewel among the federal regulatory agencies.
These are all challenges that the new chairman of the SEC will confront. This morning I hope to review with Mr. Donaldson a number of the key issues that confront the Commission and our financial markets, including the need for the SEC to reestablish its role as a strong independent regulatory body.
I look forward to this morning's hearing.