Dismantling of a once-proud agency: The S.E.C.

Posted Dec 16th 2008 1:20PM by Lita Epstein
Filed under: Market Matters, Money and Finance Today, Politics

When Christopher Cox was appointed by President George Bush to head the U.S. Securities and Exchange Commission, some people compared it to putting the fox in charge of the hen house -- certain he would destroy all that had been built by one of the SEC's most effective leaders, Arthur Levitt. Wall Street wanted someone who it knew would reduce regulation and enforcement. They got what they wished for -- but are they pleased with the results? Probably not. Arthur Levitt was tough to deal with but I doubt any of this Wall Street mess would have happened if he were still in control of the SEC.

The Bernard Madoff scandal is just another in a long string of missteps from the agency Christopher Cox helped to dismantle. Cox's budget cuts and the regulation changes he encouraged removed the SEC's enforcement division's teeth, making it harder for the agency to impose penalties on corporations.

Christopher Cox rarely took a stance against anything Wall Street could dream up. When Bear Stearns was in trouble, he was like Nero declaring there wasn't a problem as Rome burned. Just three days after Cox assured investors all was well, Bear Stearns collapsed.

David Kotz, the commission's new inspector general, documented several major botched investigations involving Bear Stearns. One critical one involved the dropping of a key inquiry into securities sold by Bear Stearns in Miami. Another report documented the lack of any significant oversight by the commission regarding Bear Stearns as it spiraled into total collapse.

Sound familiar? Not much different than what we'll probably learn about the mismanagement by the SEC involving its oversight of Bernard Madoff. The list grows daily of charities that have been destroyed by Madoff and the lives of retirees that are now in ruins. Hopefully President-elect Obama will soon name someone who can rebuild the SEC to the proud institution that it once was.

Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and the Complete Idiot's Guide to Value Investing.

Tags: arthur levitt, ArthurLevitt, Cox, featured, SEC

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Reader Comments (Page 1 of 1)

12-16-2008 @ 1:43PM

Mike said...

lol, you serious? Bush was hardly the one to dismantle government regulation and oversight. Presidents Nixon, Ford, and Carter all come to mind...

Be careful what you wish for. While the wild wild west had it's disadvantages, it is also what helped make our markets so liquid. Having to answer to a suit every time a company wants to do anything will lead to a slowdown of any and all innovation and give the consumer fewer options.

12-17-2008 @ 9:12AM

irieblue said...

There is no way the SEC can recover from this. The only thing left is to eliminate the SEC and start over with a new name, new powers and a new mission with a leader that can not be bought.

Also Obama needs to publicly cast off Cox a la John McCain who said in September that Cox has failed the American people.

This moFo should not be able to land a cushy job in the private sector, once he is gone, his contract is up in June 2009, but if he has any integrity, he will step down to spend more time with his family come an Obama administration.

12-18-2008 @ 5:44PM

Subprime Showtime said...

irieblue is right - my suspicion is that the rot in the SEC is so severe they should just shut the whole thing down. An ineffective and corrupt supervisory body cannot restore investor confidence.

http://subprimeshowtime.com/2008/12/18/time-to-disband-the-sec/