From the halls of Congress to the halls of the Nichols School, people who know William H. Donaldson rejoiced Tuesday at the news that the native of Buffalo had been chosen to head the beleaguered federal agency that oversees the stock market.
President Bush nominated Donaldson, the 71-year-old founder of the investment firm Donaldson, Lufkin & Jenrette, as chairman of the Securities and Exchange Commission. The agency has been in flux since the resignation last month of SEC Chairman Harvey L. Pitt, who found himself being accused of being too close to the corporations and accounting firms he was supposed to be regulating.
Lawmakers and Donaldson's old associates and friends agreed: With Wall Street still enmeshed in scandal, Donaldson could be the perfect person to restore the SEC's credibility.
"The SEC desperately needs someone who both has a deep knowledge of how the markets function and at the same time possesses a rock-ribbed integrity," said Sen. Charles E. Schumer, D-N.Y. "Bill Donaldson is such a man."
Richard A. Grasso, who succeeded Donaldson as president of the New York Stock Exchange, called Donaldson "an outstanding choice."
Elizabeth Gurney, director of development at the Nichols School, called the Nichols graduate "a good friend and terrific guy" who just this year gave the school $1.5 million to refurbish a building.
Wall Street seemed to like the selection of Donaldson as well: The Dow Jones industrial average rose just over 100 points Tuesday, ending a run of seven straight declines, spurred in part by the Donaldson appointment, analysts said.
An 'exceptional career'
Bush had plenty of good things to say about Donaldson. Introducing Donaldson during a brief ceremony in the Roosevelt Room of the White House, Bush touted his record on Wall Street and in academia, saying it prepared him perfectly for heading the SEC.
"Throughout his exceptional career, Bill Donaldson has shown an ability to take on big assignments, to confront big problems, and to meet big challenges with a lot of energy and a lot of success," Bush said.
Donaldson's mission will be "to vigorously enforce our nation's laws against corporate corruption," the president said.
In response, Donaldson said he was prepared to do just that.
"Confidence in the U.S. corporate and financial industries has been seriously eroded during the past few years," he said.
"Until my nomination is confirmed by the Senate, I believe it would be inappropriate for me to comment on exactly what I hope to accomplish as chairman of the SEC. Let me just simply say that I am firmly committed to doing everything that I can do to restore the confidence of investors."
Served under Kissinger
Donaldson's nomination came as something of a relief to politicians and Wall Street professionals who had watched Pitt struggle in the job.
Pitt, a longtime accounting industry lawyer, encountered one controversy after another during his tenure. He called for a "kinder and gentler" approach to regulation just before shady accounting was exposed as one of the causes of the implosions of Enron and WorldCom. And he met privately with the head of the KPMG accounting firm at the very time that the SEC was investigating the company's handling of Xerox's books.
Whereas Pitt was widely seen as an apologist for the accounting industry, observers said Donaldson has far wider business experience that will make him an instantly respected regulator.
"He certainly has the background, stature and knowledge to do a good job," said Rep. John J. LaFalce of the Town of Tonawanda, the ranking Democrat on the House Financial Services Committee.
Grasso, the head of the New York Stock Exchange, noted that Donaldson has a rare blend of experience. After leaving Donaldson, Lufkin & Jenrette, Donaldson served as undersecretary to then-Secretary of State Henry A. Kissinger and then left to found the Yale Graduate School of Management. He later formed another investment company and served as chief executive officer of Aetna.
"He is an entrepreneur and true patriot who will bring to the commission his strong commitment to investor protection," Grasso said.
What's more, people who know Donaldson call him a straight-talking nice guy who should be able to connect with the public at a time when the public is more connected with the stock market than ever before.
"He has just an enormous amount of class, intelligence and wisdom," said Eva M. Hassett, commissioner of administration and finance for the City of Buffalo, who knows Donaldson from her days at the Yale School of Management. "He has an ability to connect in just about any setting. His ability to speak to a lot of different audiences will be really invaluable."
Keeps returning to Buffalo
Donaldson grew up on West Delavan Avenue, the son of an Eastman Machine Co. industrial engineer. He graduated from Nichols in 1949 and returned to the Buffalo area briefly after a stint in the Marine Corps.
But even after he left to build a fortune on Wall Street, he kept coming back home. Friends say he still comes to Buffalo about once a year, even though he no longer has any family here.
"He's just such an ideal guy, a man of absolute integrity," said Vic Williams of Buffalo, a Nichols classmate and one of Donaldson's best friends. "He's got great interpersonal skills. I don't know anybody who doesn't get along with him."
Several friends said Donaldson has been extraordinarily loyal to both Nichols and his classmates. Just last year, he held a 70th-birthday party for his classmates in his New York home. And this June, he traveled to Buffalo for the dedication of Donaldson Hall, the refurbished building that now houses the Nichols Middle School.
"He's a wonderful guy," said Charles Yeager, a classmate and retired insurance executive. "He's had a tremendous record of achievement in everything he's done."
As Donaldson set out to build such a record at the SEC, he recalled some words he heard years ago in Buffalo.
"There have been numerous instances of serious malfeasance, which, if proven, we will continue -- and must continue -- to deal with swiftly," he said. "As my mother used to say many years ago, 'It's time for all of us to pull up our socks.' "