SYNOPSIS:

DOBBS: Coming up next, "New York Times" columnist, Paul Krugman will join me. He accuses the Bush Administration of not truly wanting corporate reform and he has some evidence that he would like to discuss and I can't wait to hear it. He'll join me next. Stay with us

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DOBBS: We want to remind you to vote in our poll tonight. The question -- should the president have invoked Taft-Hartley to restore shipping in the West Coast ports? And cast your vote at cnn.com/moneyline. We'll the results for you coming up here in just a matter of moments, the preliminary results. You may vote in this poll until -- about 23 hours, until tomorrow evening. SEC chairman, Harvey Pitt, faces criticism about the way he's handling accounting reform. A 5-member accounting oversight board has been authorized by Congress, but there is some confusion about who will be appointed to lead that board. In today's "New York Times," columnist Paul Krugman says that uncertainty about that appointment raises question about the White House's commitment to true corporate reform. Paul Krugman joins me now. Paul, why does this raise questions about the sincerity, the commitment, the depth of that commitment?

PAUL KRUGMAN, "NEW YORK TIMES" COLUMNIST: Well, look, what's actually happening -- and this is actually not in dispute -- is that certain Republicans, Michael Oxley of the Financial Services Committee, in particular, has basically weighed in saying, We don't want a guy heading this new oversight board, who's...

DOBBS: Of Sarbanes, Oxley fame.

KRUGMAN: That's right. That's right. As I said in the column, the Sarbanes-Oxley bill, that's kind of like having a nest Capone initiative to clean up Chicago. But anyway -- but, all right. You know, maybe Michael Oxley has seen the light, but he has...

DOBBS: You've got to -- I -- first of all, I think that's witty as it can be. But let's be honest, the Sarbanes-Oxley bill is true reform. But it is not sufficient by any means and no one would suggest it. But it is real reform and it's reform we didn't think we even could achieve.

KRUGMAN: That's right. But the most critical element has got to be that this oversight panel, which doesn't yet have members, has to be seen as being firm, independent, maximum integrity, maximum immunization for political influence. And here you have a leading Republican coming in and clearly, everyone says, exerting political influence on the selection. And, look, the White House has no fingerprints on this, but if we have nothing -- if there's one thing we have, it's a disciplined Republican Party. Surely the incumbents on the White House say to this guy, Don't do this, you know.

DOBBS: Paul Krugman accuses Republicans of discipline. You can do better than that, Paul.

KRUGMAN: They're disciplined. I never said that.

DOBBS: Well, let's talk about what we're talking about and that's John Biggs, the head of the largest teacher's in the country, a fund stepping up...

KRUGMAN: That's my money, by the way, yes.

DOBBS: Well, and you have some vested interest, which we should disclose this conflict here, Paul.

KRUGMAN: I think on one...

DOBBS: The fact is his big send to this point is he's let people know he wants the job. He's campaigned for the job. That has been off putting to Congressman Oxley. It's been off putting to Harvey Pitt, the chairman of the SEC, but guess what? Paul, I'm going to shock you. I agree with you. He's the toughest critic. I think he ought to be the guy running it.

KRUGMAN: Well, I -- you know, I don't actually know anything about Biggs, which...

DOBBS: Well, let me help you out. He is a terrific candidate. He is exactly the right person.

KRUGMAN: But the point is that this could all have been headed off at the very least. Is anybody minding the story? This is the worst thing you can have. Right now, you know, with the -- with investors starting to feel that maybe the trouble is not over with stock markets near their lows.

DOBBS: Starting to feel the problems may not be over.

KRUGMAN: No, the feeling that the -- a feeling that the corporate reform that they were counting on. And here we have -- you know, this is not -- this is -- we don't see this -- we don't have Republican Congressman going around and making trouble on policy on Iraq. What's going on?

DOBBS: Well, through your partisan lens, you have nonetheless, I think, glimpsed the truth here. Biggs needs to be in there and he should not be pushed away simply because he wants the job and simply because he's a critic of the accounting industry. And I couldn't compliment you more.

KRUGMAN: Yes, we -- let me put it a little more...

DOBBS: More succinctly.

KRUGMAN: The whole corporate government's problem, we've only made a partial step with Sarbanes-Oxley. The most important thing is to make that secure and be seen to be proceeding forward. If the perception is that we're backsliding -- and that is the perception among more and more people -- then there's going to be hell to pay in the markets...

DOBBS: You and I...

KRUGMAN: ... and the economy.

DOBBS: And you and I know it's not just perception, it's reality and that reality is with us right now. Paul Krugman, thank you for pointing it out and excellent column today. And you're always excellent column and thanks for being here.

KRUGMAN: Thanks a lot.

DOBBS: And now, we're going to find out exactly what should be done about corporate governance and reforming accounting in this country, whether enough has been done and if not, what should be done. SEC chairman -- former SEC chairman, Arthur Levitt. He'll be here. He has written a fascinating new book, "Take on The Street" and I think that you can read that with a number of inflictions in your choice.

Originally broadcast, 10.8.02