Administrative Law
SEC’s Chief was MIA as US Markets Swooned, Some Say
Posted Sep 22, 2008, 12:35 pm CST
By Martha Neil
Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson were the men of the hour last week, stepping in with a viable emergency plan as the U.S. economy appeared to be on the verge of a massive meltdown following a year of ongoing bad news.
But where was Christopher Cox, the chairman of the U.S. Securities and Exchange Commission? The 55-year-old attorney has taken a more active role recently, but he still doesn't appear to be key player in federal efforts to address a lack of regulatory oversight that has eliminated a number of once-mighty corporate names from Wall Street, reports Bloomberg in a magazine-length article. Meanwhile, if Paulson has his way, the SEC itself could largely be eliminated from the regulatory landscape, and merged with the Commodity Futures Trading Commission.
"Paulson and Bernanke have stepped up to the plate and taken the lead in responding to the current economic crisis,'' says former SEC general counsel Ralph Ferrara, a Republican. "There is a risk that the SEC will be marginalized unless the chairman insists on a seat at the table.''
Although the SEC took a more active role in recent events such as the failed efforts to find a way to help the Lehman Brothers investment bank avert a bankruptcy filing, many observers feel it was a case of too little too late, Bloomberg reports. "Former SEC officials and members of Congress say throughout the tumult in the banks and markets, Cox, a Harvard University-trained lawyer, has often been missing in action."
As discussed in an earlier ABAJournal.com post, the SEC last week imposed both a temporary ban on short selling the stock of 799 financial companies and new rules limiting so-called "naked" short-selling of any stock.
And, although Cox declined to be interviewed for the Bloomberg article, he has previously said that he has been a more independent and tougher enforcer than his predecessors.
But yesterday's Fed approval of a bid by Wall Street's two remaining investment banks to become bank holding companies, trading their independent status for the benefits and stricter regulation accorded to commercial banks, further emphasizes the SEC's waning influence, one observer tells the news agency.
"It's a downward spiral where the less significant the population you regulate, the less your available resources,'' says David Becker, a former SEC general counsel who is now a partner at Cleary Gottlieb Steen & Hamilton in Washington, D.C. "It also makes it harder to attract and retain people who want to hitch their professional careers to rising stars.''
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Comments
Posted by rawdawgbuffalo - 2 months, 5 hours, 15 minutes ago
Riddle me this, don’t you think McCain or Obama should tell us who will be their Treasury Secretary? Just a query. I mean with almost a trillion dollars on the line.
Posted by Pete Wanger - 2 months, 1 hour, 20 minutes ago
Seems like Cox, a Republican, was following the limited government, anti-regulation principles of the Republican party. That it didn’t work and caused these financial crises doesn’t seem to bother the American people very much. That’s too bad.
Posted by associate - 1 month, 4 weeks, 2 days, 5 hours, 27 minutes ago
I’m still trying to figure out what bad loans, bad investement ratings, and bad paper have to do with insider trading and required financial reporting. Maybe Cox didn’t do anything because his position doesn’t authorize him to do anything that could substantively affect the way that these guys were doing business.
I think the whole problem has a lot more to do with the non-existant lending standards accepted by Fannie and Freddie, the investment ratings handed out by S&P and Moody’s that were based on something other than due diligence, and the refusal to mark CDO’s and mortgage backed securities to anything resembling market value. But these changes go back to the Clinton administration, and McCain was out front with his 1999 article warning about this stuff, so I guess it’s just too much to expect the Journal and the rest of the media to report the full story. Finding a Republican scape goat is a much easier story. Shame on John McCain for blaming someone who had no control over the substantive issues. He actually knew better and did it anyway. That’s dishonorable.
Posted by J.D. - 1 month, 4 weeks, 1 day, 10 hours, 20 minutes ago
It’s not the free market that failed. Companies made bad decisions, and they suffered the consequences. Plenty of people took out loans they couldn’t afford, and they suffered the consequences. That’s the way the market works.
If you think getting the gov’t more involved is going to improve things, well, I’ve got a bridge to see you…. with no money down!