Quick rule of thumb: If you run a regulatory agency, it’s generally a bad sign when the press wants to know what you’re up to. Newspapers aren’t known for running adulatory profiles of the FCC commissioners, for example, and the same goes for the people who run the Securities and Exchange Commission. Securities regulation is such a highly technical subject that few in the press or the public understand anything beyond the broad contours of what the SEC does. So when people start paying attention to the SEC, it’s usually because they’re upset that it’s not doing whatever it is that it’s supposed to do. For now, however, SEC Chairman Harvey Pitt appears to be that rare regulator who is actually seeking the limelight. He’s jawboning with WorldCom, appearing on Sunday morning talk shows, and even showing up on the Today show. Pitt has become more than the nation’s top securities regulator—he’s the Bush administration’s point man in its PR campaign to prove that it’s tough on corporate crime. He’s an odd choice for the latter, given the two main weaknesses the 57-year-old Pitt has demonstrated in his 11 months as SEC chairman—a lack of political skills and a susceptibility to criticism for his ties to Wall Street, especially the accounting industry. Since Pitt became chairman, critics have blasted him for cozying up to accounting firms and their lobbyists while developing a new regulatory plan for the accounting industry, and for meeting privately with the chairman of KPMG, one of the nation’s major accounting firms. And although Pitt promised to recuse himself for one year from matters directly involving his many former legal clients (112 of whom each paid him more than $5,000 in the year before he became SEC chairman, and at least 10 of whom face formal SEC investigations), the St. Petersburg Times reported in May that Pitt “regularly stays in the room for commission discussions of matters involving his former clients.”Despite all the criticism Pitt has taken for being too close to Wall Street, it was his industry connections that made him such a widely heralded choice for the job last year. Born in Brooklyn, Pitt attended Brooklyn College and St. John’s law school, after which he went to work at the SEC as a staff attorney. In 1975, after seven years there, he became the youngest general counsel in its history, when he was only 30. But it was after Pitt left the SEC to enter private practice that he really began to make his name. His clients included the New York Stock Exchange, Lloyd’s of London, Merrill Lynch, all of the Big Five accounting firms, plus their lobbying organization, the American Institute of Certified Public Accountants. And it was through Pitt’s efforts that his most notorious client, Ivan Boesky, secured a light two-year sentence for massive insider trading. As Sen. Charles Schumer, D-N.Y., put it at Pitt’s confirmation hearing, “He is, without question, the most talented and respected securities lawyer in the United States today.”Pitt came into office pledging a “kinder and gentler” SEC, and his conciliatory style contrasted with the adversarial approach that his predecessor Arthur Levitt took to the job. Now, in a bizarre reversal, Pitt is implying that Levitt wasn’t tough enough during his tenure. “I inherited this,” Pitt told Fox News last week. “But I promise you that I am not going to leave my successor the same kind of mess.” When asked if he was blaming Arthur Levitt for the current financial crisis, Pitt replied, “I blame no one. All I can [say] is that these problems did not arise overnight, and they certainly didn’t arise on my watch.” Critics love to suggest that Pitt somehow caused, say, Enron and WorldCom to cook their books. That’s patently false, and although some of Pitt’s meetings as SEC chairman have been justly condemned for creating the appearance of impropriety, it’s worth remembering that the appearance of impropriety isn’t impropriety itself. The real question isn’t whether Pitt was complicit in the recent accounting scandals—there’s no evidence that he was—but whether he’s going to be able to clean up the mess. There’s little doubt that Pitt has embraced the SEC’s role as the enforcer of current law. Under his leadership, the SEC has initiated a record number of investigations into corporate malfeasance, and he may punish the new malefactors of great wealth with a convert’s zeal. But Pitt’s real troubles are beyond his control. The SEC is woefully underfunded and understaffed, as a General Accounting Office report detailed earlier this year. Not only are SEC lawyers underpaid compared with lawyers in private practice (compare Pitt’s $3 million salary before coming to the SEC with his new $133,700 salary), but they’re underpaid compared to some other government lawyers—“The SEC lawyers get paid one-third less than their counterparts at the Federal Reserve and Justice Department,” Levitt told USA Today earlier this year. That low compensation is the main reason why 40 percent of the SEC’s staff left the agency between 1998 and 2001. The annual turnover rate for its lawyers, accountants, and examiners is 15 percent, more than double the governmentwide rate. That brain drain has hurt the agency’s ability to carry out its duties. The SEC estimates that it takes a new employee two years to fully learn how to do the job, but in 2000, more than three-quarters of its examiners had worked there less than three years. The GAO says the nation’s securities regulators have had trouble keeping up with their workload since 1996. Not only does the SEC not have much of a staff, but right now it doesn’t even have much of a commission. There are supposed to be five SEC commissioners, including the chairman. Now, however, there are only three. One SEC enforcement action has already been dismissed by a judge because there weren’t enough SEC commissioners to vote on it. Which doesn’t inspire much confidence. All those senators who slobbered on Pitt last year—Schumer compared him to Winston Churchill and Zeus—can certainly change their minds now. But unless there’s a commission to lead the SEC, and a competent staff to carry out its dictates, it doesn’t matter who’s in charge.