Following is a transcripted excerpt from Fox News Sunday, July 7, 2002.

TONY SNOW, FOX NEWS: Have accounting shenanigans become the rule or the exception in corporate America? And is there anything Washington can or should do about it?

Congressman Michael Oxley, chairman of the Financial Services Committee, opens an important hearing tomorrow on the WorldCom mess. He joins us from Providence, Rhode Island.

Also here, our panel: Brit Hume, Washington managing editor of Fox News, and Fox News contributors Ceci Connolly, national correspondent with The Washington Post, and Juan Williams, national correspondent for National Public Radio.

Congressman Oxley, when we are taking a look at these spreadsheet problems, this mess, how widespread is the problem today?

REP. MICHAEL OXLEY, R-OHIO: Well, I think it comes in cycles, Tony, and this is one of those. I saw an interview with Peter Drucker the other day that said he has seen four of these kinds of cycles, where you just get overemphasis on corporate profits, not paying enough attention to customers, and cutting corners and trying to hide different aspects of the business. And I think we're in one of those cycles right now.

I don't think it's as widespread, perhaps, as some people would believe, but clearly there's some real problems here.

SNOW: We're going to show some corporate logos, as I ask this next question, because there are a number of companies that have been mentioned publicly about this. We have K-Mart and Tyco and others.

But you have hinted a little bit at one of the possible causes of this. I'd like you to elucidate what, in fact, is the cause. Were there legal loopholes that encouraged companies to be able to do this kind of accounting and get away with it legally or illegally?

OXLEY: Well, I think that in the case of Enron, for example, you've already had the prosecution of Arthur Andersen, a successful prosecution, and it appears that it may very well be that existing statutes and existing regulations have been violated. That's one of the things that we're going to probe tomorrow in the hearing. It may very well be that a lot of the alleged fraud that has taken place has already been -- is already on the books and has already been violated.

BRIT HUME, FOX NEWS WASHINGTON MANAGING EDITOR: Mr. Chairman, from what we know from the companies that we've seen so far where real problems have been identified, not merely alleged, are being investigated, is this a case of companies who were cheating as a way of doing business, or companies who started cheating because their way of doing business wasn't working?

OXLEY: I think the latter, Brit. I think it's clear that particularly in the telecommunications sector, where you've had some real problems with overcapacity, some real problems in the business, it appears that some of these cost-cutting efforts and their cooking the books occurred to basically hide what was a failing business practice. And I suspect that we will see some of that tomorrow at the hearing.

HUME: Well, now, this raises this question, Mr. Chairman, about how widespread the problem is. Tony touched on this earlier. Try to look at this, if you can, from the point of view of an ordinary investor -- and I suspect, to some extent, you probably are an ordinary investor. The market is down, there's a lot of fear that there's more of this out there. What is your sense of that as an investor yourself? Would you be buying now?

OXLEY: Well, I would be buying now, frankly. And I think the market Friday was an indicator of that. There are a lot of good buys out there with well-run, solid companies. And I think the investors are going to be getting into those investments.

Clearly, some of the areas are very touchy right now and will be avoided. But that's really the marketplace at work, and I think it's a very effective regulator. The marketplace, ultimately, is the best regulator of this type of activity.

CECI CONNOLLY, FOX NEWS CONTRIBUTOR: Mr. Chairman, I wanted to ask you, so much of this is so complex, as you're aware. But I think one simple notion that has really reached everyone in the public is the idea of accounting firms also doing consulting work for the same company and the potential for conflict of interest.

As I understand it, your bill does not outright ban that sort of conflict of interest?

OXLEY: We ban two areas. That is, the ability to do internal and external audits by the same accounting firm, as well as consulting on information technology. We give broad authority to the SEC to further carry that forward if they wish.

I am a firm believer in giving the SEC wide latitude as opposed to writing it specifically into the law. And as you may have noticed, the marketplace is already working in this area because a number of the accounting firms have already divided off their consulting operation, and I suspect that that will continue.

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: Congressman Oxley, let's talk politics for just a second here. The charge against much of the problem, in terms of the Bush administration's view of this, is that they have been lax in terms of regulation. Now, that would speak to the kind of thing that you do on the Financial Services Committee.

Is lack of regulation a problem, a root cause for the financial problems that we're seeing across the board today?

OXLEY: Well, I don't think it's a lack of regulation, Juan. It may very well be an enforcement issue. And understand that this just didn't start on Harvey Pitt's watch, but it's been going for some time.

And really, what we're trying to do is change the laws where it's necessary, including, by the way, beefing up the SEC's enforcement division by some 70 percent. That's already passed the House on a large, bipartisan vote.

If you're going to have the SEC -- and I think all of us believe very strongly that we need a strong SEC -- if they're going to be the cop on the beat, then we need to make sure that they have a big billy club. And in fact, that's exactly what our proposal does.

WILLIAMS: So do you have confidence in Harvey Pitt, who, in some ways, is becoming a man targeted by many as the fall guy in all this, the man who should resign, a man portrayed as being too close to some of these companies that he's supposed to be watching?

OXLEY: Well, I think that's always a concern. It's always a charge when somebody comes from the private sector to take an important position like chairman of the SEC. But believe me, I have nothing faith in Harvey's abilities, his integrity. The president has strong support for him.

And I think that he has been very aggressive. He moved very quickly on this WorldCom situation, the fastest really in history that the SEC jumped in. They appointed Richard Breeden, a former SEC chairman, to oversee so we didn't have document shredding like happened in Enron/Anderson.

I think the SEC is on top of this job, and Harvey Pitt is an excellent leader.

CONNOLLY: Mr. Chairman, keeping with Juan's theme of the political implications of some of this, President Bush is expected to give a speech on Tuesday on Wall Street to really speak to the theme of corporate responsibility.

Yet, we're certainly hearing from his Democratic critics, at least, that, does he really have the moral authority when you think back to several years ago, he sold some $800,000 worth of stock in Harken Energy Company and that trade, that sale was not reported for, I believe, eight months to the SEC. At first the president said it was because the SEC lost the paperwork. More recently, his spokesman has said it was a lawyer mix- up.

But does that make it a little more difficult for the president to really deliver this tough message?

OXLEY: Not at all. The president is very sincere about this. I think he felt very strongly about the revelations that came out with Enron, with WorldCom, with Adelphia, with a number of others. And I think he's going to speak from the heart on Tuesday. We've had some conversations about it.

Clearly, this was way in the past, that the SEC never brought an action. There is no hint of anything illegal or improper. It may have been a foul-up on the part of the lawyers.

But no, I think clearly the president has strong feelings about this and will be in full throat on Tuesday.

HUME: Mr. Chairman, I suspect you're aware, or believe it likely, that whatever you and the Republicans leaders in the House propose as additional measures to avoid this kind of problem in the future, that your colleagues on the Democratic side are going to propose more than you propose, heavier penalties and more new regulation. Given the situation in the markets, that may have real political appeal.

How confident are you that you can hold back the tide of the kind of added regulation that you suggest in this interview that you don't favor?

OXLEY: Well, you make a great point there, Brit, because we have to be careful that we don't overreact, play, do some political grandstanding on this.

The public, by the way, the polls that I've seen, feel very strongly that Congress has a better chance of screwing things up and making it worse than making it better. So I think the public has low expectations of what the Congress could or should do.

HUME: Well, what's your feel in the House of Representatives tell you about what the members are feeling and whether Republicans will stand together on this or whether Republicans will peel off and vote for more intense regulation?

OXLEY: Well, we've already passed our bill in the House, Brit, and it passed by a huge margin. We had 119 Democrats, virtually all Republicans vote for it. It passed 334 to 90.

It was a very strong bill, but I think it's a realistic bill. It gives the SEC added authority to do what they do best and regulate that area. But I don't think that we want to interfere with the capital markets. And I fear that there may be some overreaction.

And I think I share the president's feeling that we can get a good bill that solves some of the problems but doesn't over-regulate or over- legislate.

SNOW: Mr. Chairman, Paul O'Neill, the Treasury secretary, the other day had some comments. He thinks that we have a case of unbalanced justice here. He says, "A kid caught with half a pound of marijuana gets more jail time than a corporate executive. That's not square." We're assuming he's talking about corporate executives that break the law.

Billy Tauzin, today, has said that we ought to put -- "The corporate scoundrels ought to go to jail."

A lot of Americans look at this, look at people making money after they have lied to shareholders, to Wall Street and everybody else, and they seem to have gotten off scot-free. Should some of these people end up in jail?

OXLEY: Well, I'm not a law enforcement -- I used to be a law enforcement official. I'm not anymore. And I will leave that up to the Justice Department and the SEC. I think that's really their function. I'm a legislator, and we're working on legislation that I think solves most of the problems out there.

But on the other hand, I think the Justice Department has been very active in working on the Anderson case, the Enron case. They've been -- obviously, we had a couple of witnesses slated to testify. We deferred to the Justice Department on that because they are investigating and didn't feel it was proper at this point to have those witnesses.

So I feel very confident the Justice Department will do what is necessary.

SNOW: So would you call these declamations, these demands for corporate leaders' heads, would you call that political grandstanding?

OXLEY: Well, I'm not going to characterize that. I would just simply say that we have to understand that our function in the Congress is one of legislating, not enforcing the law.

SNOW: OK, Congressman Michael Oxley, thanks for joining us.