With the White House’s blessing, a House panel voted Tuesday to water down a key post-Enron measure designed to protect investors.

In a voice vote, members of the House Financial Services Committee agreed to permanently exempt from a provision of the 2002 Sarbanes-Oxley Act all publicly traded companies with market values less than $75 million — which amounts to more than half of all public companies.

The provision mandates that firms obtain audits of their internal controls. Companies say it costs too much. Though these firms have received annual deferrals from this requirement since its 2004 enactment — some think the fiercely anti-regulatory Bush administration had something to do with this — SEC Chairman Mary Schapiro said last month that the deferrals had ended, and that the firms would be expected to comply by 2010.

So Reps. Carolyn Maloney (D-N.Y.), John Adler (D-N.J.) and Scott Garrett (R-N.J.) went to work. All three offered amendments to delay or prevent its planned implementation. Adler’s amendment from last week went the furthest, proposing to exempt four out of five publicly traded companies.

And it’s not just HuffPo bloggers who think it stinks.  Here’s Rolfe Winkler at Reuters  and Floyd Norris at the NY Times.

…veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under President Bill Clinton. “Anyone who votes for this will bear the investors’ mark of Cain.”