Arthur Levitt, Former Securities and Exchange Chairman

This is a partial transcript from Your World with Neil Cavuto, November 15, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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TERRY KEENAN, HOST: With looming terrorist threats and weapons inspectors headed for Baghdad, Wall Street's focus is clearly split between the war on terror and the battle for investor confidence. And a big part of restoring that confidence will be putting someone back in charge of the SEC. So who has the qualities to take over now that Harvey Pitt is out? Let's ask former SEC Chairman Arthur Levitt. He is author of Taking on the Street.

Mr. Levitt, welcome, good to see you again.


KEENAN: So who do you think should replace Harvey Pitt?

LEVITT: I don't know, there is no specific person I would recommend. The agency is so good, the people who work there are so loyal and dedicated it will carry on very well.

KEENAN: Should it be a Wall Streeter or an enforcer or an accountant, what do you think?

LEVITT: It should be someone who is recognized by the public as being tough, understanding the issues of our security markets, and someone who will place the interests of investors above all others.

KEENAN: So Rudy Giuliani type if he wanted to do it?

LEVITT: I think a Rudy Giuliani type would be just fine.

KEENAN: We just got word in the last 30 minutes or so of a tentative settlement in the state investigation here in New York, into the research practices at Citigroup, headed by your old partner Sandy Weill, also C.S. First Boston. Each look to be settling with the fine in the range of about $200 million. Citigroup earned $16 billion last year, a slap on the wrist in your opinion?

LEVITT: I think the amount of money is absolutely irrelevant. They obviously can afford it. I think the key issue here, and I say it in my book, is analysts, research must be separated from investment banking, it is as simple as that. And I think anything less than that just doesn't do justice.

KEENAN: But research doesn't make money does it?

LEVITT: So what? Neither does paying the rent make money or paying salaries. Who says it has to make money?

KEENAN: So it's the cost of doing business then.

LEVITT: Yes. Absolutely.

KEENAN: Where are we in these accounting scandals? They seem to have died down a bit in the last couple of months. Do you think we are closer to the end of the revelations than the beginning?

LEVITT: I think that we probably are unlikely to find much more fraud of the magnitude that we have seen. But we are going to have lots of restatements, which will cost investors money. And until that is squeezed out of the system, which will take some years, because companies have to learn to keep the books the way they should have been kept, that won't be totally behind us.

KEENAN: So as the options are expensed and the pension assumptions are brought down, that is going to continue to pressure earnings you think?

LEVITT: I think it will pressure earnings, I think earnings will be more realistic. And that is a positive. And I think a key issue here is what kind of effectiveness will the new accounting oversight board have?

KEENAN: Just quickly, are you a buyer of stocks right now?

LEVITT: I wouldn't be a seller of stocks, let me put that it way.

KEENAN: All right. Thanks, thanks as always. Former SEC Chairman Arthur Levitt.

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