Weather from Hades: Widely Scattered Frost Throughout the Day.....New York Air Traffic Delayed by Flying Pigs
I hate to say it, but the Democrats are finally right on an issue. From today's Wall Street Journal:
Now I'll premise everything I'm about to say with acknowledging that Biggs is my boss (well...actually my boss', boss', boss' boss, but who's counting). But, I've thought about it and think I'm right regardless of institutional loyalty.
Pitt had initially proposed Biggs for the job. Unfortunately, the accounting industry wasn't too pleased with the selection and got on the phone with their friendly neighborhood Congresscritters (unfortunately, in this case, Republican 'critters), and asked them to kindly see if Mr. Pitt might consider someone else...anyone else...for the job. You see, Mr. Biggs is none too popular with the accounting industry as he has been party to a number of groups that have asked some embarrasing questions of the industry. Whatsmore, he made clear that he was none to happy with the industry's reluctance to expense options and TIAA-CREF has a history of separating consulting work from auditing work. So, Mr. Pitt decided that perhaps Mr. Biggs wasn't necessarily the best man for the job, and started looking at Mr. Webster.
Now don't get me wrong. Judge Webster is a decent, intelligent man. He did a commendable job serving his country as both FBI and CIA chief. I don't for a moment think that he has any intention of playing the role of political crony. But that doesn't really complete the entire picture here. There's some problems both with Webster and his appointment.
First of all, at 78, Webster isn't a spring chicken by any stretch of the imagination. One wonders if, well beyond the age most people retire, he has the stamina to put into exercising the position to the fullest. Now, I'm not knocking the ability of our senior citizens to do a terrific job in lots of things, but I can easily imagine the commission taking on a part-time status, rather than a full-time oversight role, as the remainder of the commission is employed in full-time employment. Its almost as if the chairman is going to have to take on the role of internal leader for the latter structure to prevail. I have doubts that Mr. Webster retains that level of committment. More importantly, Mr. Webster has no background or expertise in accounting issues. Now this might not seem like such a big deal. After all, a smart guy can learn this stuff. But accounting can deal with some really complex issues: like "How many iterations of a Monte Carlo simulation are acceptable to establish sufficient convergence on an interest rate option's long-term valuation?" or "Should interpolated or historical volatilities be used in the calcualtion of option valuations for officers' compensation?" or "Should capital set aside to cover expected losses at special purpose entities be directly expensed by the guarantor and how should the special purpose entity view the capital set aside as an ownership position in the entity itself?". Not exactly things most of us spend a lot of time thinking about, eh? Now the accounting industry will be more than happy to educate Mr. Webster on these issues. But then, I'm not so sure I'm comfortable with overseer having his understanding of the issues framed by the people he's supposed to be overseeing.
We have to consider the circumstances of Mr. Webster's appointment. Its apparent that Mr. Biggs (I still find that fun to say) was pushed out of the job precisely because he was too independent. But that precisely what the board was supposed to be. Whatsmore, they specifically replaced him with someone about whom their are distinct questions. The idea here was to have an entity that could keep an eye on accounting practices and, thereby, restore some level of investor confidence in the numbers that companies are putting out. That lack of confidence is probably a major part of the reason markets have been in freefall over the last year. But the SEC's decision basically creates the perception of captive oversight board, at best cancelling out any possible improvement in investor confidence and, at worst, creating the impression that the industry (as opposed to the Federal Government through the SEC) has control of reporting standards.Of course if Mr. Webster relies on his FBI experience and leads a few accounting executives out in handcuffs, all bets are off.
I hate to say it, but the Democrats are finally right on an issue. From today's Wall Street Journal:
The SEC is Likely to approve William Webster as head of a new accounting-industry-oversight board. But Harvey Goldschmid, one of two Democrats on the commission, is frist expected to nominate TIAA-CREF pension fund head John Biggs, sparking a partisan battle
Now I'll premise everything I'm about to say with acknowledging that Biggs is my boss (well...actually my boss', boss', boss' boss, but who's counting). But, I've thought about it and think I'm right regardless of institutional loyalty.
Pitt had initially proposed Biggs for the job. Unfortunately, the accounting industry wasn't too pleased with the selection and got on the phone with their friendly neighborhood Congresscritters (unfortunately, in this case, Republican 'critters), and asked them to kindly see if Mr. Pitt might consider someone else...anyone else...for the job. You see, Mr. Biggs is none too popular with the accounting industry as he has been party to a number of groups that have asked some embarrasing questions of the industry. Whatsmore, he made clear that he was none to happy with the industry's reluctance to expense options and TIAA-CREF has a history of separating consulting work from auditing work. So, Mr. Pitt decided that perhaps Mr. Biggs wasn't necessarily the best man for the job, and started looking at Mr. Webster.
Now don't get me wrong. Judge Webster is a decent, intelligent man. He did a commendable job serving his country as both FBI and CIA chief. I don't for a moment think that he has any intention of playing the role of political crony. But that doesn't really complete the entire picture here. There's some problems both with Webster and his appointment.
First of all, at 78, Webster isn't a spring chicken by any stretch of the imagination. One wonders if, well beyond the age most people retire, he has the stamina to put into exercising the position to the fullest. Now, I'm not knocking the ability of our senior citizens to do a terrific job in lots of things, but I can easily imagine the commission taking on a part-time status, rather than a full-time oversight role, as the remainder of the commission is employed in full-time employment. Its almost as if the chairman is going to have to take on the role of internal leader for the latter structure to prevail. I have doubts that Mr. Webster retains that level of committment. More importantly, Mr. Webster has no background or expertise in accounting issues. Now this might not seem like such a big deal. After all, a smart guy can learn this stuff. But accounting can deal with some really complex issues: like "How many iterations of a Monte Carlo simulation are acceptable to establish sufficient convergence on an interest rate option's long-term valuation?" or "Should interpolated or historical volatilities be used in the calcualtion of option valuations for officers' compensation?" or "Should capital set aside to cover expected losses at special purpose entities be directly expensed by the guarantor and how should the special purpose entity view the capital set aside as an ownership position in the entity itself?". Not exactly things most of us spend a lot of time thinking about, eh? Now the accounting industry will be more than happy to educate Mr. Webster on these issues. But then, I'm not so sure I'm comfortable with overseer having his understanding of the issues framed by the people he's supposed to be overseeing.
We have to consider the circumstances of Mr. Webster's appointment. Its apparent that Mr. Biggs (I still find that fun to say) was pushed out of the job precisely because he was too independent. But that precisely what the board was supposed to be. Whatsmore, they specifically replaced him with someone about whom their are distinct questions. The idea here was to have an entity that could keep an eye on accounting practices and, thereby, restore some level of investor confidence in the numbers that companies are putting out. That lack of confidence is probably a major part of the reason markets have been in freefall over the last year. But the SEC's decision basically creates the perception of captive oversight board, at best cancelling out any possible improvement in investor confidence and, at worst, creating the impression that the industry (as opposed to the Federal Government through the SEC) has control of reporting standards.Of course if Mr. Webster relies on his FBI experience and leads a few accounting executives out in handcuffs, all bets are off.
posted by Bill Dalasio at
10/25/2002 08:32:00 PM
