The Securities and Exchange Commission (SEC) had the tools it needed to restore the financial markets after the recent terrorist attacks, but Congress could take a couple of steps to help the agency do its job, the agency's chairman said Wednesday. SEC Chairman Harvey Pitt told the House Financial Services Committee that he is "not in favor of wanton expansion of government authority" but that the SEC needs increased funding both to hire "infinitely more economists of the highest caliber" and to buy technology. Being able to hire well-qualified economists requires money to pay them competitive salaries. Congress has mulled legislation to put SEC salaries on par with other government financial regulatory agencies. Currently, SEC salaries are lower than salaries at the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and other such agencies. The Bush administration requested $439 million for the SEC in fiscal 2002, but that amount would not include the $70 million for the pay-parity plan proposed by Rep. John LaFalce, D-N.Y. The Senate-approved fiscal 2002 spending bill for the Commerce, Justice and State departments includes $71 million for SEC salary increases. "The SEC has to be at the forefront of understanding the capabilities of modern technology," Pitt said, but now the agency is "behind the times and always trails the industry." As the SEC tracks purchases and sales of securities to determine whether any traders knew of the terrorist attacks before Sept. 11, the agency needs the best resources at its disposal, he said. The SEC has been working with law enforcement agencies to track transactions that could link perpetrators of the attacks, and the agency has access to data on the trading of airline and insurance company stocks. Regional exchanges have alerted the SEC to suspicious trading, and the agency is tracking all leads, Pitt said. Committee members offered their support and assistance as the SEC aids in the investigation. Rep. Mike Rogers, R-Mich., noted that if people perpetrated the attacks and then profited from them in the U.S. markets, "there is not anything you could ask for that we would deny you in tracking them down." The SEC reported losing some records on impending securities enforcement cases when its office in one of the World Trade Center buildings in New York was destroyed. But having electronic records helped the SEC and the stock markets resume trading last week because valuable information was preserved, Pitt said. Rep. Richard Baker, R-La., asked Pitt to review the SEC filing process to find ways to "set aside paper filings in favor of electronic forms where appropriate."
Pitt also said Congress could help the agency by giving it the ability to extend beyond 10 business days the emergency rules now in place in the stock markets. Those rules, which include an easing of restrictions on when companies and their directors can repurchase their companies' shares, are set to expire Friday. Pitt said the agency is considering further steps to ensure market stability.
Having unlimited authority "is not appropriate," he said, but a more logical timeframe for emergency rules would be 30 days, with the ability to extend them if conditions warrant.