- The Washington Times - Wednesday, December 11, 2002

President Bush chose investment banker William H. Donaldson yesterday to head the Securities and Exchange Commission but delayed naming Stephen Friedman, an investment banker who has been criticized by tax-cut advocates, as his chief economic adviser.
"Donaldson will be a strong leader with a clear mission: to vigorously enforce our nation's laws against corporate corruption and to uphold the highest standards of integrity in the securities markets," Mr. Bush said in the Roosevelt Room of the White House.
The nomination came five weeks after Mr. Bush ousted SEC Chairman Harvey L. Pitt, who had been widely accused of bungling appointments to a national accounting oversight board. Critics said the furor undermined Mr. Pitt's authority as a watchdog of burgeoning corporate scandals.
"We must continue to prosecute corporate criminals," Mr. Bush said yesterday. "Bill Donaldson and his entire organization will have my strong support and the resources they need to carry out their important duties."
Mr. Donaldson, a powerful Wall Street figure who co-founded the investment banking group Donaldson, Lufkin & Jenrette, pledged to pursue corporate wrongdoing.
"There have clearly been numerous instances of serious malfeasance which, if proven, we will continue and must continue to deal with swiftly," said the former Marine. "As my mother used to say many years ago: 'It's time for all of us to pull up our socks.'"
The announcement came a day after Mr. Bush named railroad executive John W. Snow to replace Treasury Secretary Paul H. O'Neill, whom the president fired on Friday. He also fired National Economic Adviser Lawrence Lindsey but decided not to fill this third vacancy on his economic team yesterday.
The expected candidate, Mr. Friedman, is vice chairman of the board of directors of the Concord Coalition, a group that fiercely opposed Mr. Bush's tax cuts last year and has railed against federal deficits.
White House officials said yesterday that Mr. Friedman's appointment was being delayed because of new questions about his financial affairs. But some of his opponents said that could be a cover story while the president's political advisers assess the extent of conservative opposition to Mr. Friedman.
"There is a lot of grumbling over him," a Republican congressional official said. "The buzz is that he appears to be losing support."
The anti-Friedman lobbying drive was being spearheaded by Stephen Moore, who heads the Club for Growth, a campaign fund-raising organization that contributes money to candidates who support tax cuts. Other allies in that fight include Wall Street economist Larry Kudlow and tax-cut crusader Jack Kemp.
"What we're saying to the White House is that you have two jobs open on your economic team, and one of those two jobs has to be a member of the supply-side tax-cut community," Mr. Moore said yesterday.
"We're doing everything we can to squash this appointment," he said.
There was broad, if tempered, support among conservative activists for Mr. Snow to be Treasury secretary, despite his support for the Committee for a Responsible Federal Budget, which also is hostile to tax cuts.
But Mr. Friedman's association with the more deficit-hawkish Concord Coalition, as well as with the liberal Brookings Institution, made him unsuited for a major and influential policy-making role in the Bush administration, supply-siders argued.
However, the White House was telling conservative activists that Mr. Friedman would not be taking over Mr. Lindsey's job "if he were not willing to work for Mr. Bush's plan to accelerate and expand his tax cuts," said economist Bruce Bartlett of the National Center for Policy Analysis.
After the announcement yesterday, the president promised Mr. Donaldson more resources to crack down on corporate corruption.
"Over the last year, the SEC has added new personnel and will receive a significant increase in its budget," he said. "Today I'm announcing that I will request another increase in SEC funding for fiscal year 2004, which, when enacted, will mean we have nearly doubled the budgets from 2002."
White House Press Secretary Ari Fleischer said that if the Senate confirms Mr. Donaldson, his biggest challenge will be "to restore investor confidence." He declined to directly answer a reporter who sought details on attributes Mr. Donaldson had that Mr. Pitt lacked.
"I'm not going to do this as a comparison because the president doesn't make appointments on the basis of comparison," Mr. Fleischer replied. "The president makes appointments on the basis of the qualities of the people that he appoints at this moment."
He said of Mr. Donaldson: "He's widely respected by people in both parties. He's a man of outstanding integrity."
Mr. Bush agreed, calling Mr. Donaldson "a good man," which is considered the president's unofficial seal of approval.
Mr. Donaldson would not discuss specific measures he would take in his new post.
"Until my nomination is confirmed by the Senate, I believe it would be inappropriate for me to comment on exactly what I hope to accomplish as chairman of the SEC," he said.
But Mr. Donaldson, who was joined by his wife and children at the presidential announcement, articulated some broad goals.
"Confidence in the U.S. corporate and financial industries has been seriously eroded during the past few years," he said. "Restoring the confidence of investors in the integrity of the markets is the responsibility of all of us.
"Corporate managers, boards of directors, operators, regulators of our financial markets, as well as those who advise, including bankers and lawyers and accountants, must be constantly mindful of the trust that shareholders have placed in them," he said. "Each of us must take that trust very seriously."

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