SEC chair steps down after disgraceful term
Posted
Jan 21 2009, 11:30 AM
by
Kim Peterson
Rating:
Christopher Cox, the head of the Securities and Exchange Commission, stepped down from his post Tuesday, and any good that he did over his term will be vastly overshadowed by the agency's failures to police Wall Street and Bernie Madoff.
Bloomberg reports that Cox leaves a demoralized agency behind, one that has been criticized by lawmakers, investors and even its own inspector general as being a corporate lapdog. One hallmark of Cox's term is that the agency lost its teeth, cutting back its enforcement resources and allowing the market to police itself.
That lax approach blew up in the SEC's face last year, starting with the collapse of the investment banks the agency was supposed to supervise. Capping it all was the uncovering of Bernie Madoff's alleged $50 billion Ponzi scheme -- a fraud the SEC was repeatedly warned about.
"He may go down as the unluckiest of the SEC chairmen,” one securities law professor told Bloomberg. Indeed, Cox inherited a flawed system and was not responsible for many of its problems. But he set the tone for the agency, and he holds responsibility for the SEC's soft handling of enforcement.
The SEC extracted just $1 billion in fines and illegal profits from companies in 2008, Bloomberg reports. That's down from $1.6 billion the year before, and $3 billion each year in 2004, 2005 and 2006. Did these fines come down because companies started behaving better? Don't think so.
"What has ended up happening is that it has been one inadequacy after another," a securities professor told Reuters. "Not only does the chairman not get out in front of these issues, it looks like the SEC was asleep at the switch."
President Bush appointed Cox in 2005, and since then the commission has mainly stayed out of the limelight and spent its time approving noncontroversial new securities rules, Reuters reports. And while Cox pushed to modernize and streamline the SEC, he will be remembered more for what he didn't do: protect investors.
"The SEC is in worse shape today than the French army was after its defeat at Waterloo," said Lynn Turner, formerly the chief accountant at the agency. "Congress may look to some other agency to regulate, which would be to the detriment of investors.”
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