SEC Chairman Christopher Cox Strikes Back At McCain

The following is a statement released by SEC Chairman Christopher Cox in response to Sen. John McCain saying earlier today on the campaign trail that if he were president he'd fire Cox over the crisis on Wall Street:

Washington, D.C., Sept. 18, 2008 -- Securities and Exchange Commission Chairman Christopher Cox today made the following statement:

"While I have great respect for Senator McCain, we have sometimes disagreed, and this is one such occasion. The SEC has made plain that we have zero tolerance for naked short selling. In this market crisis, the men and women of the SEC have responded valiantly as they always do--with the utmost dedication and professionalism. Addressing the extraordinary challenges facing our markets, the independent and bipartisan SEC has taken the following decisive actions:

* We adopted a package of measures to strengthen investor protections against naked short selling, including rules requiring a hard T+3 close-out, eliminating the options market maker exception of Regulation SHO and expressly targeting fraud in short selling transactions.
* We issued an emergency order to enhance protections against naked short selling in the securities of primary dealers, Fannie Mae, and Freddie Mac.
* We announced emergency plans for a rule to ensure public disclosure of short selling positions of hedge funds and other institutional money managers.
* We have undertaken sweeping enforcement measures against market manipulation.
* We provided guidance to banks about how to account for credit support of money market funds.
* We've written rules to strengthen the regulation of credit rating agencies, and performed examinations that have led to new rules to reduce rating agency conflicts-of-interest.
* We brought a landmark enforcement action against a trader who spread false rumors designed to drive down the price of stock.
* We have initiated exams of the effectiveness of broker-dealers' controls to prevent the spread of false information intended to manipulate securities prices.
* Our Enforcement Division announced what will be the largest settlements in the history of the SEC for investors in auction rate securities who bought auction rate securities from Merrill Lynch, Wachovia, UBS and Citigroup.
* We entered into a Memorandum of Understanding with the Federal Reserve, to make sure key federal financial regulators share information and coordinate regulatory activities in important areas of common interest.

"There is much more work to be done, and the current crisis is presenting new challenges on an hourly basis. What America and the world needs now is steadiness and reduction of uncertainty. History will judge the quality of our response to this economic crisis, but now is not the time for those of us in the trenches to be distracted by the ebb and flow of the current election campaign. And it is precisely the wrong moment for a change in leadership that inevitably would disrupt the work of the SEC at just the wrong time. I have long made clear my intention to leave the SEC after the end of this Administration. The next President will have an opportunity to look at the major structural questions so important to the regulation and oversight of our financial markets.

"I very much appreciate the strong and immediate support of the President. As someone who has been in public life for over 20 years, I know as well as anyone that occasionally this sort of thing can come with the territory. The best response to political jabs like this is simply to put your head down and not lose a step doing the best job you can possibly do on behalf of those you serve. For my part, I plan to do just that. I leave the political campaigns to pursue their own course."

Comments

[ReasonIsMyReligion]

Bear in mind while feeling bullish that Mr. Cox would have Social Security privatized -- and wouldn't that have been grand this week -- and is an opponent of progressive taxes.

[yellowdawgdem]

Cox can only use the cards he has. McCain and Graham's deregulation allowed the excesses to occur. Big business was only doing what comes naturally.

McCain is sure trying to turn himself into a maverick again; trying to regain what he once had; so sad, so pathetic.

[Erdgeist]

Commissioner Cox is really saying after the animals have left the barn, that he has instituted barn door reform. He is just trying to cover his arse, in other words.

Since 2005, by his own rules (if he can read) "naked short selling" is not permitted. And still Cox turned a blind eye to it, letting it continue unbridled. Furthermore, his steadfast refusal to reinstate the uptick rule but in place by Joe Kennedy long ago, having learned the lessons of the crash of 1929, only makes his guilt in this catastrophe even more convincing.

I have no pity for this man or the Republicans with their deregulation mania which may have set the stage for this country's demise, economically.

[Awakenedcitizen]

The point is, McCain does not have a PLAN for the economy; as usual he responds impulsively with an emotional comment further showing his lack of understanding for what the President can and cannot do to solve economic problems. Firing the head of the SEC is not one of the things the President can do.

Obama already has a six point economic program ready to roll; a plan that he has developed over the past two years.

John, what are your other solutions besides appointing a commission to study the problem?

[Politiking]

Cox is an idiot. Most of the regulatory demands which should have been imposed were overlooked under his watch. It is one thing to say that the regulations are in place and quite another when you don't impose it. Cox should have been fired or should have never been appointed by another idiot George W. Bush. Cox' appointment is similar to many of Bush's appointments - remember Brown at FEMA? Rumsfeld at DoD! Whitman at EPA! Gonzalez as AG! and many more.

This administration should have been nullified at the last election but managed to scare the people with its rampant terrorism scare and fear tactics.

[RaderBarbarian]

Well, one might suspect that Mr. Cox is yet another Republican who likely will be crossing over to cast his vote for a Democrat come November, y'think? And I wonder if McCain fly-off-the-handle "fire him" crack actually GAINED a single vote for his ticket? Poor ol' fool just can't stop shooting himself in the foot (probably with Sarah's gun).

[JSquercia]

Can Someone explain to me What the difference is between selling Short and a Naked Short . As I understand it selling short involves selling a stock anticapting that it will drop before you actually have to deliver it

[valleygent]

That's NeoCon for an illegal trading practice... kinda like the term Freedom Fries? They have their own code for what most people would call clouding the truth.

[Egalitare]

A naked short is only legal on the beach at St. Tropez

[ReasonIsMyReligion]

The difference, as I understand, is in the ability or lack thereof to borrow the stocks that will later be sold.

[mw1260]

You're generally required to make arrangements to borrow the stock that you're shorting. A naked short is selling short without first making arrangements to borrow the stock.

[NicoleAnon]

You're telling us everything you have done NOW but your job is to oversee the regulation of the stock market and banks and you have had that job for almost two years and during that time you let conman and criminals get away with scams that EVERYONE knew was wrong so that they could take profits from it all came apart and then their buddy The Hammer makes honest taxpayers pay for it.

Now you're trying to make excuses for the fact that YOU DID NOT DO YOUR JOB and we're paying the price for it. I knew several years ago exactly what the bankers were doing - if even I could figure it out then why couldn't you?

And Americans have had it - the conmen running investment banks aren't making this world a better place - they're not curing diseases, they're not preventing wars, they're not doing anything good and they talk about "free markets" solving everything. They want to privitize their profits and socialize their losses and we won't take it anymore.

[mscriblerus]

The brilliant mister Cox. I guess it's time to spring into action and put another temporary ban on naked short selling for 19 specific companies to appear to be doing something while you watch the whole house of cards crumble. Feckless.

[scordsdu]

I may not ready to vote for someone who is quick to fire people. I've only had to fire one person. I build a stable team that is always steady and forward. John McCain might re-think his attitude to build flux by firing.

[Stanley]

Mr. Cox answered directly and concisely, with little hesitation or effort to blame. I say he is level headed, informed and should stay the course until his term is finished. Boy this makes McCain look bad! He couldn't even explain what Cox meant when he listed all of his responses and actions at the SEC. Oh boy the Republicans are falling apart on this one. Time for the Democrats to show both leadership and competence on these issues and gain the confidence of the people.

[alanposting]

STOP short selling period! What about all the bull that we are buying a piece of america when we buy stocks....you know they used to say "buy for the long haul". With short selling your betting on the destruction of the stock....shameless. Greedy people will always go where there is an extra penny to make and you can't let them make the casino rules.

[ProudLiberalDemocrat]

Markets are not one-sided. If you can lose money going long (owning stocks), then you can also lose money short-selling. Markets have to be two-sided.

What makes more sense to me is:

1. Bring back the up-tick rule that mitigates the potential downside cascade that can occur.
2. Stop rating agencies from including stock price in the formula for credit rating. If these agencies said, "In spite of stock price, Morgan Stanley is not in financial trouble....." This is what they should be saying/doing.

[dlswriter]

I can't believe Obama/Biden hadn't seized on this opportunity...

Remember Black Monday, Oct. 19, 1987?

After a few days of denying that the crash was anything worse than a correction, President Ronald Reagan acknowledged that federal deficits were one reason for market jitters, and indicated he would consider a modest tax increase as part of a deficit-reduction package, a turnaround from his previous intransigent refusal to contemplate a rise in taxes.

[valleygent]

Neo Cons on Neo Cons...Neo Cons asking Neo Cons for answers...Neo Cons kissing other Neo Cons in the butt...Neo Cons...get the point? Vote Obama 08.

[WhiteyAyersWright]

EVER SINCE THE UPTICK RULE WAS ELIMINATED...

The SEC eliminated the uptick rule on July 6, 2007.[3] The elimination of the rule was preceded by a SEC order, placed on July 28, 2004, to create a one-year pilot temporarily suspending the uptick rule on select securities. The purpose of the suspension was so that the commission could study the effectiveness of the rule. The SEC's Office of Economic Analysis and academic researchers provided the SEC with analysis of the data obtained during the pilot. The general consensus was against the uptick rule, with the commission concluding that the uptick rule "modestly reduce[d] liquidity and do[es] not appear necessary to prevent manipulation."[2]

The rule was originally put in place to avoid the perpetration of a financial crime known as a bear raid. However, short sellers themselves viewed the rule as "largely symbolic" and having little actual effect on short selling.[4]

http://en.wikipedia.org/wiki/Uptick