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A Daily Chronicle of Bush Administration Distortion November 19, 2003
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Bush's SEC Chairman Negotiates Weak Settlement with Mutual Fund, Ignoring Corporate Responsibility



Despite President Bush's strong support for corporate accountability, the President's hand-picked Securities and Exchange Commission chairman, William Donaldson, is coming under fire for negotiating a weak first settlement in the burgeoning mutual funds scandal with the nation's fifth-largest fund.

President Bush's corporate responsibility bill, signed into law in July 2002, was designed to address the wave of corporate scandals that had impacted markets, beginning with Enron's collapse in December 2001. "The fundamentals of a free market...require clear rules and confidence in basic fairness."1

The SEC settlement with Putnam Investments, announced last week, prompted Massachusetts Commonwealth Secretary Bill Galvin to say, "It's clear that the SEC is more interested in papering over wrongdoing than uncovering it."2

Donaldson was nominated by President Bush to take over for Harvey L. Pitt, who was forced to resign under pressure for perceived close ties to the companies he was supposed to regulate. Bush said as he nominated him, "Bill 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."3

Earlier this summer, Donaldson talked about improvements in corporate responsibility, saying, "I think that our actions speak pretty loudly in terms of what we've done. … I think that there is a confidence -- a building [investor] confidence out there that the cop is on the beat."4

But Senate Banking Committee Chairman Richard Shelby said, "mutual fund abuses simply did not receive adequate attention from the SEC."5

Testifying before Shelby's committee yesterday, Donaldson announces reforms of mutual fund trading in the next few months.

The President has not yet commented publicly on the growing scandal, which has thus far forced the resignation of several executives with large mutual funds and resulted in millions of dollars in fines.6

Sources:
  1. Bill Signing Ceremony, 7/30/02.
  2. "2 Mutual Funds Move to Assure Wary Investors," New York Times, A1.
  3. Presidential Personnel Announcement, 12/10/02.
  4. Press Briefing with William Donaldson and Assistant Attorney General Larry Thompson, Whitehouse.gov, 7/22/03.
  5. "SEC, Under Fire, Outlines New Fund Rules," Reuters, 11/18/03.
  6. "Funds under the microscope," MSNBC.com.



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