Risk & Compliance

SEC: And Then There Were Three

Bush scolds Senators over nomination delays — but won't make a deal — as Nazareth leaves the commission.
Alan RappeportFebruary 7, 2008

President George W. Bush rebuked the Senate on Thursday for failing to confirm more than 200 appointees to government agencies and federal courts, leaving key posts unfilled at a critical time.

The deadlock has been especially draining for those responsible for handling the U.S. economy and financial markets. The Federal Reserve, the Council of Economic Advisors, and the Securities and Exchange Commission are all lacking personnel. As of the end of January, the SEC was down to just three commissioners, with two Democrats awaiting approval. The five-person commission cannot have more than three members from the president’s party and Bush has not yet taken the Senate up on either of those recommendations.

Some observers argue that commission vacancies could slow action on proxy access proposals, acceptance of international accounting standards, and greater oversight for credit rating agencies, as lawmakers have urged the SEC to wait until two new Democrats have been confirmed. However, vacancies among commissioners are not unprecedented — albeit not an ideal situation. SEC spokesman John Nester told CFO.com that the agency worked with three vacancies in the early 1990s. And in 2002 the SEC made 18 rules and 18 rule-proposals during a seven-month period with two vacancies.

Senate Majority Leader Harry Reid last year recommended two Democrats to the president to fill the empty SEC seats: Elisse Walter, a former SEC official and an executive vice president with the Financial Industry Regulatory Authority, and Luis Aguilar, a partner at law firm McKenna Long & Aldridge and formerly an attorney at the SEC.

However, on Thursday, Bush said that political gamesmanship was putting the country at risk. “The Senate is not fulfilling its duty,” he said. “The confirmation process has turned into a never-ending political game where everyone loses.” Bush made his plea in the East Room of the White House with nominees lined up behind him. He reminded those holding up the process that nominees were not “political pawns” and that they deserved a vote.

Senate Democrats have been accused of stalling the nomination process in an effort to limit Bush’s influence beyond his final term which ends next January. They offered a deal that would have filled dozens of positions until the end of Bush’s term, but would not agree to grant full terms to Bush’s choices for the Federal Reserve’s Board of Governors. As a result, those positions, and others, are languishing. “The three-member Council of Economic Advisers is down to one person, which makes for lonely council meetings,” Bush said.

New York Democrat Senator Charles Schumer told The Wall Street Journal this week that Democrats offered to approve two of Bush’s nominees for the CEA in exchange for the nomination of the two Democrats to the SEC. The move was apparently rejected and Bush made no reference in his East Room appearance to the SEC vacancies.

Aguilar, who would replace the departed Roel Campos, has drawn some fire for earlier comments that criticized parts of the Sarbanes-Oxley Act. Walter’s recent work has been focused on protecting investors from scams and improving regulation of mutual funds. She would replace Annette Nazareth, who left the SEC last week.

Bush remarked that the vacancies were coming at a tenuous time for the economy, as some predict the country may enter a recession. “The Senate must confirm nominees who help guide our economy during a time of uncertainty,” Bush said. “The Senate has stalled nominations for critical economic positions.”