WASHINGTON – William J. McDonough, the president of the Federal Reserve Bank of New York, isn’t retiring after all.

McDonough yesterday accepted one of the most contentious jobs in Washington: chairman of the Public Company Accounting Oversight Board, the panel created by the Sarbanes-Oxley Act to ensure that accounting fraud never again leads to such corporate collapses as that of Enron Corp. or Global Crossing.

The board, which some are nicknaming "Peekaboo," was created by the 2002 law and briefly chaired by William Webster, the former director of the Federal Bureau of Investigation. He left in December amid questions about his selection and his own corporate conduct. As the man who picked Webster, Securities and Exchange Commission Chairman Harvey Pitt was forced to resign.

So why would McDonough, who is 68 and announced in January that he would retire in July after 10 years of successfully stewarding the New York Fed, take on such an assignment?

"I love accounting theory," he said at a press conference here. "I think it is one of the most interesting things one can be involved in."

A litmus test of his success, he said, would be if in a few years, "the very best graduates of the very best universities think it is a good idea to go work for an accounting firm."

The selection was popular on Capitol Hill, with Democrats Rep. Barney Frank of Massachusetts and Sen. Paul Sarbanes of Maryland commending the choice.

The other side lined up to applaud, too, including House Financial Services Committee Chairman Michael Oxley (R-Ohio). Senate Banking Committee Chairman Richard Shelby (R-Ala.) said McDonough would "provide the solid leadership that is necessary to a board that will play such a critical role in restoring investor confidence to our capital markets."

Whether executives of public companies will greet the selection with the same enthusiasm is less clear. McDonough blasted executive compensation in a speech last September: "Beginning with the strongest companies, CEOs and their boards should simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels."

The five-member Public Company Accounting Oversight Board has been led by Charles Neimeier, previously the chief accountant in the SEC’s enforcement division, on an interim basis since Webster resigned.

McDonough, 68, said in January that he would retire in July. But he could leave in May, depending on how long it takes for the SEC to complete the vetting process.

In addition to his Fed job, McDonough has led the effort to update international bank capital rules as chair of the Basel Committee on Banking Supervision. Though without an accounting degree , he said supervising financial institutions requires thorough knowledge of accounting principles.

Before joining the Fed, McDonough was the chief financial officer at First Chicago Corp.

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