NYT/Reuters: Cox's Reign Seen Denting Own Image, SEC's Future
By REUTERS
Published: January 4, 2009
WASHINGTON (Reuters) - Christopher Cox will most likely be remembered as the regulator who was unable to do enough to protect investors during the worst financial crisis since the Great Depression. When the 28th chairman of the U.S. Securities and Exchange Commission steps down early this year, he will leave behind an agency tarnished by regulatory missteps and threatened with being reorganized out of existence by a reform-minded Congress.
Under Cox's watch the investment banks that the SEC loosely supervised either collapsed or reorganized as bank holding companies in 2008 and the agency was criticized for interfering with free markets when it temporarily stopped investors from making bearish bets on financial stocks. The most recent blow to the agency, now entering its 75th year, was its failure to spot financier Bernard Madoff's alleged $50 billion securities fraud despite his activities being flagged to SEC staff over many years.
Some of the criticism is undeserved, securities experts said, as the genesis of the crisis began well before Cox became chairman and the cures extend beyond the reach of the agency. However the perception remains that the 56-year-old former California congressman did not do enough to protect investors.
"Cox had the greatest perception of inactivity in the face of this crisis. People wanted the SEC to be this outspoken proponent of investor protection, reinvigorate its mission and let people know that the SEC was on top of this," said Jay Brown, a securities professor at Sturm College of Law. "What has ended up happening is that it has been one inadequacy after another. Not only does the chairman not get out in front of these issues, it looks like the SEC was asleep at the switch."
Cox was criticized for reassuring the public about Bear Stearns' capital levels just days before the investment bank's dramatic collapse and federally engineered rescue last March. The SEC's inspector general, an internal watchdog, issued reports scolding the agency for failing to adequately supervise Bear Stearns and limit the amount of risk it took on. A devastating article in the Wall Street Journal in June described Cox as missing from critical meetings and conference calls during the Bear Stearns crisis and bailout, exacerbating the perception of a regulator who was missing in action....
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The questions about the SEC's performance come at a particularly bad time, as Congress gets ready to revamp the country's financial regulatory structure. A report issued by the Treasury Department at the end of March recommended a less powerful SEC and a merger between securities and futures regulators....
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Lynn Turner, the SEC's chief accountant during the Clinton administration, described Cox as "the worst" SEC chairman to ever lead the agency of 3,500 employees. "I can't think of anything he did that was really protecting investors," Turner said.
http://www.nytimes.com/reuters/2009/01/04/washington/politics-us-sec-cox.html
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