Yet when I joked recently with a few of these guys that they could apply for the vacant chairman's position at the Securities and Exchange Commission, each of them suggested that they'd rather be unemployed.

It's into that kind of wouldn't-wish-the-job-on-an-enemy environment that Wall Street icon Bill Donaldson recently accepted President Bush's nomination to become the next head of the SEC.

In light of the abysmal public perception of outgoing chairman Harvey Pitt's performance in the job, Donaldson is a cinch to increase the popularity of America's top securities watchdog. But his honeymoon period -- assuming Donaldson passes muster with Congress -- will be short-lived, and he will have a mountain of challenges to overcome.

How Donaldson tackles the pressing challenges of his job will determine whether his appointment truly is good news for individual investors. Here are some of the issues he will face:

Donaldson's own reputation and background, which brands him as a corporate insider.

Donaldson, 71, is the founder of Donaldson, Lufkin & Jenrette, a big investment banking firm, and a former chairman of the New York Stock Exchange (from 1991-95). Those credentials are similar to what the well-respected Arthur Levitt brought to the SEC chairman's job.

But most SEC chairmen have been lawyers; only two leaders of any repute -- Levitt and Joseph Kennedy in 1934 -- gained most of their experience as Wall Street insiders.

Donaldson will have to overcome that label. He's got a ton of friends in the securities business; if there is any perception that he is kowtowing to those buddies, Donaldson will have a short, horrific, Harvey Pitt-like tenure.

The SEC is woefully understaffed.

President Bush has pledged to double the SEC's budget to $800 million in 2004, but that's no guarantee. Besides, given all of the new initiatives the SEC has had to pursue -- the regulatory fallout from the Sarbanes-Oxley bill that enhanced corporate disclosure, for example -- the new funding likely still won't be sufficient to aggressively pursue all potential violators.

In the current court of investor opinion, an SEC chairman will be judged as much by the scandals that happen on his watch as by the ones his regulators pre-empt.

If the budget increase goes through, Donaldson has a better chance than Pitt did to put more bite behind the SEC's bark. If he uses the increased funding to hire a bunch of his old Wall Street buddies, doesn't adequately beef up enforcement staff and can't make the agency more aggressive, he'll go down in flames.

A public clamoring for more disclosure than the investment community believes is necessary.

When it comes to disclosure issues, everything is on the table. Chief executives signing statements? Got it. Mutual funds disclosing portfolios? On the way.

Any proposal that can gain public support -- and the 8,000 comments the SEC received on its proposal to force mutual funds to disclose proxy votes was a new record for comments on a disclosure issue -- is fair game.

But the investment world isn't thrilled with these developments, with many executives believing all of this disclosure represents too much backlash for the sins of a few problem companies.

Donaldson himself is in an interesting position. He's on the record as not being particularly fond of Regulation FD, the controversial "fair disclosure" act that forces companies to release information to the public and the analytical community at the same time. If he's not pushing for more disclosure, he'll have to convince the public that he's at least behind "smarter" disclosure. It will be a tough sell.

Potential regulation of hedge funds.

Heightened disclosure has a lot of money managers looking to the world of hedge funds, which are essentially unregulated pools of money from wealthy investors, operated in a top-secret manner. The more hedge funds that get created, the more they look toward individual investors to be their next source of funding.

The SEC is studying hedge funds, and many industry watchers believe that the hedge fund world is where the next great investment fraud or scandal may be brewing. If Donaldson doesn't proceed with regulation and a hedge fund blows up, the general investing public will lose faith.

Martha, Martha, Martha.

I'm no fan of Martha Stewart, but her ordeal needs to end. Either she needs to be charged with a crime or be named in a civil action, or told she isn't going to be.

We've seen corporate bad guys led off in handcuffs in publicity stunts designed to make investors feel better. Now the SEC needs to decide how it is going to deal with Martha. Given the split between her fans and her detractors, this is a no-win situation when it comes to public opinion. Either she gets off too easily or doesn't get treated harshly enough.

With that in mind, Donaldson would be fortunate to have this decided before he is confirmed and takes office. If it isn't, he'd be wise to get it over with in a big hurry and move on to the more substantive issues that will shape opinion of him.

Charles A. Jaffe is personal finance columnist at The Boston Globe. He can be reached by e-mail at jaffe@globe.com or at The Boston Globe, Box 2378, Boston, MA 02107-2378.