NEW YORK (CNN/Money) - William Webster resigned Tuesday from a newly created board meant to police the accounting industry as government efforts to clean up financial book-cooking appeared to trip over another hurdle.

William Webster

Webster submitted his resignation to Harvey Pitt, the outgoing chairman of the Securities and Exchange Commission, only a week after Pitt himself resigned under fire over Webster's appointment.

Coming three weeks after his appointment, Webster's departure may delay the work of a congressionally mandated panel born out of corporate scandals at Enron and WorldCom.

Webster's short tenure at the Public Company Accounting Oversight Board began with controversy. A well-regarded former FBI and CIA chief with limited accounting experience, Webster was named to the board Oct. 25 in a politically charged 3-2 vote.

William Webster speaks with Lou Dobbs about why he resigned the chairmanship of a newly created accounting oversight board. Play video (QuickTime, Real or Windows Media)

Calls for his resignation came amid revelations that Webster, 78, had headed an audit committee of a company whose accounting had come under question.

Pitt backed Webster's appointment. But Pitt resigned after failing to tell fellow SEC commissioners, and the White House, about Webster's role as head of the audit committee at U.S. Technologies, a Washington, D.C.-based Internet investment firm facing shareholder lawsuits accusing it of fraud. Internal investigations of the selection process followed.

Speaking on CNN's Lou Dobbs Moneyline, Webster said the controversy was distracting the work of the committee.

"I thought I would clear the air by stepping out of the way," said Webster, who also said he believed the board could be fully running by April, as mandated

"I will be watching this board with great hope for it," Webster said.

In his letter to Pitt, Webster described the controversy as a "perfect storm" in the making, telling Pitt that too many forces were at work that would prevent the oversight board from doing its job effectively.

"I now believe my continued presence on the board will only generate more distractions which will not be helpful to the important mission of the board," Webster wrote.

The first meeting of the new board is planned for Wednesday, a gathering that was to be mostly an administrative one.

Three days after Pitt submitted his resignation, Robert Herdman quit as the SEC's chief accountant. An acting chief accountant was named Tuesday, but replacing Pitt, which requires Senate approval, and Webster could take months.

"There is a new climate in Washington," Greg Valliere, political economist and chief strategist at Charles Schwab Washington Research Group, told CNNfn's The Money Gang. "Even the appearance of impropriety can do in a career."

The accounting board was mandated by the Sarbanes-Oxley Act that Congress passed in July -- the biggest overhaul of the nation's securities laws since the stock market crash of 1929 led to the creation of the SEC. The board will have the power to inspect and discipline auditing firms by revoking their registrations and imposing fines.

Congress stepped in after the scandals at WorldCom, Enron and Adelphia Communications, as well as the conviction of Arthur Andersen, Enron's outside auditor, on obstruction of justice charges in June, had sapped investors' confidence in the nation's financial markets. Details of how the new board works will be up to its five members.

New York Attorney General Eliot Spitzer, who has accused Wall Street firms of misleading investors with tainted stock research, said Tuesday: "William Webster has had a stupendous career. Let's get a fresh start."

The SEC inspector general and Congress' auditing arm, the General Accounting Office, are investigating the circumstances surrounding Webster's appointment, and the Senate Banking Committee plans hearings.

Webster fired U.S. Technologies' outside auditors last year when he headed the board of directors' auditing committee. The auditing firm, BDO Seidman, recently alleged that Webster had made "false and misleading statements'' about how much he knew about the company's financial problems.

The departure could also boost a previously derailed candidate, John Biggs, a recently retired pension fund executive said to be tougher on the accounting business.

Biggs was said to be the leading candidate for Webster's job until he was reportedly pushed aside for his tough stance toward cleaning up the accounting industry. Until he retired in November, Biggs ran TIAA-CREF, a pension fund with $274 billion in assets under management.

Biggs has called on companies to expense stock options, a move that would cut profits, and he favors separating the auditing and consulting functions at accounting firms, an idea the industry opposes.

In October, Democratic SEC commissioners Harvey Goldschmid and Roel Campos opposed Webster's selection and supported Biggs. They would likely support him again.

William Webster resigned from a newly created accounting-oversight board. CNNfn's Tim O'Brien reports. Play video (QuickTime, Real or Windows Media)

Webster was named to head the FBI by President Carter in 1978. Under Webster, the FBI exposed widespread fraud in the savings and loan crisis. He was named to head the CIA by President Reagan in 1987. Webster was also a U.S. District Court judge.

"Judge Webster's proven integrity and long record of accomplishment would have served the American people well, as it has time and time again," Pitt said in a statement accepting Webster's resignation. "I continue to believe that investors would have benefited from Judge Webster's dedication to the best interest of the American people."