Securities and Exchange Commission chairman Christopher Cox has defended his regime in a way that would just leave the public gob-smacked.
The culture of slack oversight allowed US financial institutions and rogues like Bernard Madoff to plunge the United States into recession but Cox says the SEC has done nothing wrong. In an extraordinary Washington Post interview , Cox defended his leadership, saying that the SEC remained calm and measured. In fact, he says, that is its biggest achievement!
"What we have done in this current turmoil is stay calm, which has been our greatest contribution – not being impulsive, not changing the rules willy-nilly, but going through a very professional and orderly process that takes into account unintended consequences and gives ample notice to market participants…When these gale-force winds hit our markets, there were panicked cries to change any and every rule of the marketplace: 'Let's try this. Let's try that.' What was needed was a steady hand."
So steady in fact that it didn't move, until it was too late. And the SEC staying "calm" is no reassurance for the businesses that have gone bust and the people who are losing their jobs.
As Broc Romanek points out in his blog, it's indicative of the way people at the top just aren't taking responsibility. "From the beginning, I didn't like it that a sitting Congressman was appointed as the head of an independent agency. The SEC was already being "politicized" before Cox arrived, but this trend accelerated on his watch. And some say that Cox cared more about how the media perceived him than how the Staff performed (one of his responses to the credit crunch was hiring two more PR guys). It has been written that he fought budget increases for the SEC (albeit with some urging from Commissioner Atkins), even when those in Congress responsible for the SEC's oversight urged him to seek more resources. Anyways, the SEC is in dire straights these days and a new Chair couldn't come at a better time. Now, I'm certainly not blaming Chris Cox for this financial crisis (nor do I blame him for any failures in not catching Madoff – I just don't like the manner of his admission). The government isn't to blame for the greed that greased this wheel. What blows my mind is the "tone at the top" of our country's leaders in the aftermath of this crisis. President Bush recently has said that he's not to blame because all of the problems related to the crisis started before he got in office (somehow ignoring the fact that he is responsible to fix anything broken while he's in office)…More importantly, the CEOs and boards of this country have shown no remorse for the pain that 'Main Street' is now feeling due to their missteps."
Sources have told TPM Muckraker that the SEC under Cox got bogged down in such bureaucracy that it was impossible to do any investigations. " 'Under Cox, increasingly burdensome standards were applied to obtain subpoena power,' the source told TPMmuckraker in an interview. For investigators to obtain subpoena power, they're required to write a memo to the SEC's commissioners. Previous commissioners were more willing to respond by granting subpoena requests. 'But under Cox,' the source continued, 'when you bring your memo down there, they pepper you with questions. It dies a thousand-cuts death.' The source added that a running joke has developed among enforcement staffers that the commissioners apply a 'summary judgment standard' – in other words, requiring enough evidence to make a full ruling – merely to agree to issue a subpoena. (SEC humor, perhaps – but indicative of what the source describes as the commissioners' extreme reluctance to issue subpoenas.) That in turn produced 'a chilling effect', said the source, in which investigators became less and less likely to ask for subpoena power.
In other Cox was hopeless as a manager, and that contributed to all the investment banks the SEC oversaw either collapsing or getting swallowed up, and the finance industry falling under Government control.
The only good thing you can say about the SEC at the moment is that it will soon be under new management. But that's the only positive. Cox will no longer have the job but his legacy will be felt for many years.
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