Christopher Cox, the longtime congressman from Orange County who became head of the Securities and Exchange Commission in 2005, inconspicuously left his job last month after a bruising final year in office. As Cox stepped down as SEC chairman, media accounts of his time were critical. Below are some excerpted stories and editorials.
Christopher Cox Quietly Steps Down as SEC Chairman
The Bond Buyer, Jan. 22
Christopher Cox stepped down as the chairman of the Securities and Exchange Commission, after having been criticized for acting too slowly on the financial crisis and failing to protect investors.
Cox’s resignation followed President Obama’s inauguration, though it was not formally announced.
SEC spokesman John Nester confirmed Cox’s departure but said the commission does not have a copy of his resignation letter, which was sent to Obama officials. An Obama spokeswoman could not be reached.
Cox previously said he intended to depart at the end of the Bush administration, though his term did not officially expire until June.
Mary Schapiro, the chief executive officer of the Financial Industry Regulatory Authority, has been tapped by Obama to head the SEC.
Cox leaves the agency after three and a half years at its helm. Last year he launched a series of initiatives to boost municipal disclosure and accounting standards, though most of them failed to gain traction among market participants or in Congress, with the exception of a central repository for issuers’ muni disclosures.
Cox’s Reign Seen Denting Own Image, SEC’s Future
Reuters, Jan. 5
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.
The 28th chairman of the Securities and Exchange Commission 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 before he was arrested.
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 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 weekend of the Bear Stearns crisis and bailout, exacerbating the perception of a regulator who was missing in action.
Cox said the article was disappointing and that he worked around the clock that weekend.
President Bush appointed Cox as head of the SEC in 2005 to heal deep divisions among the agency’s commissioners and bring calm to an institution that had bulldozed its way through regulatory reforms and accounting scandals involving Enron, WorldCom and other companies.
For much of his tenure, Cox did just that. The SEC remained out of the limelight and its five commissioners unanimously adopted noncontroversial securities rules.
Cox focused on modernizing the SEC and corporate disclosure through tools such as a machine-readable computer code, XBRL, or interactive data. He made it easier for investors to read and understand mutual fund prospectuses, forced companies to disclose their executives’ compensation in a standard format and instilled rules to make it easier for shareholders to communicate via the Internet.
He defended the Sarbanes-Oxley corporate reform law, enacted in response to the Enron debacle, and reached agreements with international regulators in an effort to improve coordination on securities policy, accounting rules and global enforcement cases.
Cox, who was a senior associate counsel to former President Ronald Reagan, had a free-market philosophy that was perfectly aligned with the business-friendly Bush administration. But the administration’s stance proved to be a weakness as it failed to adequately regulate increasingly sophisticated financial products that blew up and triggered the financial crisis.
Former SEC Chairman Harvey Pitt, who resigned in 2003 after a tumultuous 18-month tenure, praised Cox as a strong chairman who had to deal with an unprecedented crisis.
“The question really is, was he true to the SEC’s mission and mandate and did he try to improve his effectiveness? In my view, the answer is yes,” said Pitt.
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.
What the SEC Needs
The Providence (R.I.) Journal, Jan. 23
Happily, Christopher Cox will no longer be SEC chairman. President Obama has chosen the estimable Mary Schapiro to succeed him.
Until all hell started to break loose on Wall Street last year, Mr. Cox had been loath to regulate the circus that the stock and bond markets have become in recent years. After the sterner attitude of his predecessor, William Donaldson, Wall Street’s high-rollers welcomed the former California Republican congressman as likely to take a delicate approach to watching and punishing bad behavior. He seemed to forget that his job was not to please (or displease) the investment banks, brokers and hedge funds but to protect the investing public. And since Wall Street itself didn’t understand how derivatives worked, why should he have?
Perhaps Mr. Cox was a case of someone being nice to those he was regulating in the hope that he’d get a great post-SEC job, and a lot of money, from those he regulated. Or maybe Mr. Cox believed that just about everyone would conduct himself according to the Boy Scout code, though there is little in the history of human nature to suggest that this would happen.
