Senate Failing to Perform Crucial Consent Role

Nine months of revelations of corporate misdeeds, questionable accounting
practices and major bankruptcy filings have left markets reeling and investors
anxious. Congress is wrestling with its legislative response. The Securities and
Exchange Commission is searching for answers. The president recently declared
that “confidence in our free enterprise system is being tested.”

Unfortunately, that’s not the only system being tested. Hearings last week
before Sen. Paul Sarbanes (D-Md.), chairman of the Banking, Housing and Urban
Affairs Committee, who sponsored the Senate-passed version of the corporate
responsibility bill, show that our presidential appointments process is also
under stress.

The confirmation hearings of the nominees for SEC commissioner—Paul Atkins,
Harvey Goldschmid, Cynthia Glassman and Roel Campos—demonstrate the serious
nature of these problems and illustrate the magnitude of their consequences.
During a time when it should have been exercising great responsibility, four of
the SEC’s five seats sat empty for far too long. The Senate finally confirmed
the four SEC nominees July 25, after they had waited a combined 506 days for
confirmation, along with 11 other nominees.

As Chairman Harvey Pitt recently outlined, the SEC has been struggling to
improve the agency’s performance, particularly in the area of enforcement. The
staff of the Division of Enforcement has embraced the concept of “real time”
enforcement—bringing quick actions. According to Pitt, the approach has
produced dramatic results thus far.

In the first 10 months of this fiscal year, the division filed a record 122
actions for financial reporting and issued disclosure violations, 20 percent
higher than in all of 2000. In the same 10 months, the division sought to throw
unfit officers and directors out of corporate boardrooms in 71 cases, almost
twice the number sought in 2000. But imagine what more could have been
accomplished with a full slate of commissioners on the job. Surely Pitt,
recently treated by the press as if he were the sole member of the SEC, can
imagine what it might be like to have a full, five-member regulatory commission
on board.

Unclogging the current logjam of nominees and fixing the appointments process
for the future could help avoid these kinds of problems. The four seats that
were empty at the SEC were a microcosm of the problem: The two nominees whose
hearings were held July 18, Atkins and Goldschmid, were nominated on Dec. 21,
2001, and May 24, respectively. Glassman’s nomination was forwarded on Dec. 21,
2001, and her hearing was held July 23. Conversely, Campos’ nomination was sent
up on July 16, and his hearing was also on July 23. Why must some nominees wait
seven months for a hearing and others only seven days?

According to the Brookings Institution’s Presidential Appointee Initiative,
of the 63 nominees currently awaiting Senate confirmation as of July 23, 16 have
been waiting since 2001. As of July 23, there had been a record 43 Senate
working sessions without a single executive confirmation—the longest gap
dating back more than a decade to the 101st Congress. Also looming are the 14
new presidential appointments that must be confirmed by the Senate as part of
the new Department of Homeland Security. The Senate needs to fulfill its
constitutional role of advice and consent and hold votes on these nominees.
However, some Senators would prefer to hold nominees hostage for reasons
entirely unrelated to their fitness to serve, or use them as chattel in their
“horse-trading.”

“It’s kind of the way we’ll deal with nominees, fits and starts, fits and
starts,” Republican Sen. Larry Craig (Idaho) said recently. Sen. John McCain
(R-Ariz.) has pledged to object to other nominations “for as long as it takes”
until his personal pick for the FEC is officially appointed to the commission.
Yet, if the new Homeland Security Department operated “in fits and starts,”
these same Senators would be the first to denounce it. And, if the SEC vowed not
to act for “as long as it takes” until it got its commissioners confirmed, it
would be castigated.

It is the inability of the Senate to perform its duty of advice and consent
in a timely manner that should be castigated. While Senators are busy changing
the rules affecting corporate governance, they ought to enact a rule of their
own agreeing to hold an up-or-down vote on confirmation within 45 days of the
nomination being reported to the Senate. That’s plenty of time for thorough
scrutiny.

The Senate has a short window of opportunity this week to unblock the
confirmation clog before the August recess begins. The 59 nominees remaining to
be confirmed have been waiting an average 127 days. The critical SEC functions
hampered by the absence of unconfirmed appointees have counterparts in other
agencies, and the price we pay for these gaps in our government is very large.

As Sen. Sarbanes said last week, it is “important to get the commissioners in
place, by moving forward as expeditiously as we can.”

This is equally true of the rest of the nominations still languishing in the
Senate.