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5 Failures of SEC Chairman Cox!
Mark Sunshinem
September 21, 2008

Almost all paths of incompetence in the current crisis run through the office of the Chairman of the SEC, Chris Cox. McCain’s solution to fire Cox isn’t tough enough. Exile is better. Fortunately for Cox this isn’t the Stalinist Soviet Union or his fate could be a lot worse.

Cox’s failures are too numerous to count. However, I’ll give it a try. Below are what I think are his top 5 failings.

1. Failure to enforce disclosure laws and regulations.

Disclosure rules and regulations protect investors by requiring companies to disclose everything that is needed for informed investment decisions. And, CEOs and CFOs are required to sign certifications that such disclosure is materially accurate, complete, and that their companies have adequate internal controls to ensure such accuracy and completeness.

Enforcement of disclosure rules and regulations has been a joke. CEOs lie to shareholders with impunity and without fear of SEC enforcement. It is impossible to conclude that SEC filings for Freddie, Fannie, AIG, Lehman, or Bear Stearns complied with SEC rules and regulations.
However, instead of enforcement by the SEC, there is silence. While not all management actions are criminal, why hasn’t the SEC used its civil enforcement authority, i.e., assessing fines and penalties? How about protecting future investors by banning failed executives and boards of directors from serving in executive management at other public companies?

2. Failure to enforce accounting standards.

When Cox states that the SEC doesn’t have regulatory authority over capital adequacy of financial services companies, he isn’t telling the truth. The SEC has regulatory authority over the financial statements of ALL publicly traded companies in the U.S. which of course includes the financials. If Cox had required greater reserves and transparency of financial services companies it would have happened.

Every quarter all publically traded companies file reports with the SEC that are provided to shareholders and the SEC has review and comment authority. If the SEC deems financial disclosure inadequate, incomplete or opaque it has the authority to force the company to amend its filings. It also has authority to establish accounting standards for publically traded companies which means it can have different requirements than GAAP.

So when the AIG filed its last quarterly report and decided that it didn’t need to have loan loss reserves against defaulting mortgages and securities, the SEC had the ability to require additional loan loss reserves. When Freddie and Fannie decided to pretend that defaulted mortgage were good assets because it changed its accounting standards, the SEC could have just said “no”. When Lehman manufactured $2.4 billion of pre-tax income by pretending that it wasn’t going to repay its debts (one of the dumber aspects of mark to market accounting), the SEC should have protected investors with disclosure.

3. Failure to supervise the rating agencies.

Cox wants everyone to believe that despite being the rating agency’s only regulator, the SEC has no oversight or enforcement authority and cannot influence their performance. Once again, the SEC’s statements are false. Cox assumes that no one will take the time to read the Credit Rating Agency Reform Act of 2006 which states that the SEC has the right to suspend or revoke the license of any of rating agency for a wide range of reasons. Rating agency regulation and reform is Cox’s responsibility.

4. Failure to investigate and prevent market manipulation, i.e., naked short selling.

Free markets are supposed to be honest markets. The naked short selling issue isn’t new and the SEC’s knee jerk emergency response is an embarrassment. The ban on short selling of 799 stocks is very similar to Putin’s actions this week to manipulate the Russian stock market. I haven’t a clue whether or not the uptick rule works, but I know that enforcing rules on naked short selling shouldn’t have required destructive and ill thought out emergency orders. In the middle of the 1800’s the legendary financial scoundrel, Daniel Drew, understood naked short selling was bad (as he lost his fortune covering a short squeeze) when he said, “He who sells what isn’t his’n, Must buy it back or go to prison.” Too bad Cox never took economic history in school (or googled economic trivia).

5. Failure to protect small investors.

It is no coincidence that according to the FT, stock ownership by individual investors is at an all-time low. The average individual investor knows that his chances in the market aren’t good. And the SEC doesn’t seem to care if the average guy is disenfranchised from the economic future of America. In addition to the above failures, Cox forgot that it was his job to make sure that brokers shouldn’t engage in deceptive sales practices (like in the sale of auction rate securities and the sale of Freddie and Fannie common and preferred stock to small investors because they were “guaranteed” by the government). Cox refuses to support private litigation by individual investors who were ripped off in the stock and bond market. If the SEC doesn’t protect the little guy, who will?

It is hard to think of how anyone could have done a worse job than Chris Cox (other than engaging in illegal conduct). But if anyone can think of things that I have missed, please feel free to tell everyone reading this by commenting. I doubt that my list is complete.

This article has 67 comments:
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cpeterka
Sep 21 10:20 AM
My Website
And where was John McCain for the last 26 years ?
Fighting and passing bills for LESS Regulation.
Give me a break on the "It's the SEC's Chairman's Fault."
Who was in charge for the last 7.75 years?
What was McBush doing for more regulation over his TWO Terms with a Republican Congress?

Oh, and let's say it was Bill Clinton's fault, he's been out of office for 8 years and left us with a SURPLUS. How's that Surplus doing with the Republicans in charge?
How's your 401K doing?
Mine wants me to vote for Bill Clinton.
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Holy Catfish
Sep 21 10:34 AM
The Republican Party has gutted America!
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rickhhn
Sep 21 10:38 AM
When Cox was appointed, the Wall Street Journal article expressed concern that he was a "hands off" deregulating person. That's why he was chosen by the current administration.
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truthbeknown
Sep 21 10:42 AM
As you should know, the SEC has no authority to set capital ratios or to determine effective rating processes. Your perversion of the truth is so obviously politically motivated as to be laughable. During this real American crisis, McCain should be supporting Cox so that he can do his job rather than targeting an able administrator in order to look like a maverick.
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User 266660
Sep 21 10:43 AM
Regarding the short-selling the SEC changed an age-old rule that has been in place since the 1930's after the first crash. No, short selling unless there is an up-tick in the market. Meaning you can't short sell on the way down. Thus, keeping anyone from manipulating a stock into a free fall. That was done away with less than 1 year ago. And, now we have this. That rule change should be highly scrutinized.
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PastTense
Sep 21 10:45 AM
From the Big Picture:
"…the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1. "
•
Post
Sep 21 10:46 AM
Wow, those were some very insightful comments made by Obama's trained monkeys. It is unreal how blinded this election has made people. Please keep your Pro-Obama, destroy McCain comments to yourself and blogg about the topic.
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racer x
Sep 21 10:46 AM
both parties are complicit and both parties are clueless to a remedy. as they both roll out their grand schemes to remediate (more taxes, more regulations, more, more, more) what do you think the up and down stream consequences will be?!...less liquidity, less credit, more cost to comply. these are hard times for sure, but remember that 15% of the subprime loans are "stressed"; meaning, 85% are not...more of this will most likely turn sour, but a lot of "regular folk" who properly managed their debt (didn't over-extend their mortgage) benefited by wall streets "greed" - a greed that fed 401k's, mutual funds, lower interest rates, etc. go Liberterian!!!!
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Leaked SEC
Report
Sep 21 11:12 AM
The following link contains a report leaked from within the SEC. The public was getting screwed by the U.S. option exchanges and specialist firms on trades where there was a higher likelihood that the public would profit from the trade. In 2000, the SEC ordered the option exchanges to both remedy the problem and monitor for future violations. The violations continue into the present day. The SEC will not assist the public in this matter. Over a million individual violations have taken place. Don't believe me. Believe the SEC. Read the report. They caught the AMEX falsifying documents to conceal the violations.

www.thememoryhole.org/...
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rscor2an
Sep 21 11:14 AM
Yup, its all George Bush's fault and McCain equals Bush. I wish the political hacks from both parties would get off the net, the ignorance of their pre-written responses only shows their complete lack of understanding of the problems and their respective party's lack of ideas concerning a solution. In this case the author has summed up the situation nicely. But, whats next?
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INSIGHT
Sep 21 11:16 AM
My Website
The Buck Stops Here !

The SEC has allowed the illegal act of "Naked Short Selling" for many years. A pure violation of public trust !

This covert action was made possible by both the NASD (Finra) and DTCC (Depository Trust Corporation) The DTCC (DTC) is a private corporation whose board members are the elite of former members of both the SEC and Wall Street. DTC control 98% of all electronic clearing of all stocks in the U.S. and a good percentage worldwide. The buck stops here as DTC makes money off of every share transferred. Where a short exist, DTC creates new out of thin (electronic) air.

Finally, the money made by Hedge Firms by 'Naked Short Selling' is upward of hundreds of billions.

The American Public have be fleeced and our faithful leaders sit on their golden thumbs.
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MEK
Sep 21 11:32 AM
Who we gonna shoot? Things are messed up, gotta fire somebody. The real culprits are of course, the administration and whoever was chair of the Commerce Committee in the senate.

This kind of thinking is totally useless in a situation like this. One should distinguish between revenge and solutions. The writer, and supporters are defending a failed philosophy, so ingrained in the political and financial system that no small (and I mean small), retaliatory action will have any more affect than killing the mosquito that bit you.

Yes, the pervasive deregulation fervor of the Regan era continued and spread into many in the Democratic party. However it's a Neocon philosophy from start to finish, "markets will regulate themselves" has been the mantra for this entire administration. Those who pointed out that historically, the didn't, were laughed at.
Let's just admit that the idea itself was wrong, and, dare I say, Move On!
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pncurtis
Sep 21 11:36 AM
Mr. Cox's failures are an example of what happens when the President makes an appointment because the person is a friend rather than because the person brings the prerequisite skills to the office. Whenever this happens in the private sector companies disappear. Whatever happened to identifying the skills needed for the job and then finding someone with those skills for that job?
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CA
Sep 21 11:39 AM
Mark Sunshine, you got it wrong. The problem is called structured finance. Go study for two years, then come back.
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Peter,
Grvlle, SC
Sep 21 11:41 AM
Very easy to blame politicians but CEO's and CFO's were just taking chances to protect their huge bonus... why not send a few to jail for a number of years without parole?

What happens next? Look at mid twenties, same over spent, living beyond your needs and means. Then the collapse of depression (is this the next step?) and then world war 2.... now what will happen? If we continue to live beyond our means and real needs, depression is on the sure path. And while we worry and squabble between us about money, another country secretly prepares for world war 3 to take over the west. No conspiracy theory. Just look at patterns what is next.

How to get out of the mess? Raise the interest rate. let those that lived beyond their means and needs join a marshal program and start real work, off the couch in front of TV! Go and build and make, not just manage service contracts that moved real jobs overseas.

Becoming just a service nation living in a dream of Hollywood may be the real issue. Stop trying to manage, get off the couch and work. Just look who is the most obese nation with the highest medical problems. Loose the sweet tooth, more exercise and sport in school.

We only have ourselves to blame for lack of discipline... and nobody will cry over America's loss. They all have their own issues to deal with and want to control us.
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psygone
Sep 21 11:45 AM
This financial meltdown will resonate loud and clear on November. 4th -- get use to it folks -

and on January 20th 2009, at exactly 12:00 noon, you will hear the following words......

" I Barack H. Obama, do solemnly swear as President of these United States, that I will support and defend the Constitution against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God."
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jason tucker
Sep 21 11:48 AM
The Bush policy has always been to decrease regulation, and when unable to do that, they decrease prosecution and enforcement. His habit of making agencies sit on the sidelines and do nothing has enabled this problem. The same thing has happened at the D.O.J. Look at the hearings of the Senate Judiciary Comittee and the D.O.J. Bush has enabled the CEOs to be dishonest and Money Managers to execute illegal transactions. To say this issue is not partly cause by political actor's refusal to regulate is plain wrong. You must acknowledge that our executive failure to regulate and prosecute has enabled this to happen. Fact is Bush is asleep on the job, purposefully. And, McCain's anti-regulatory stance, and willingness to put more money in the hands of those people responsible for the fraud, the CEO's and Money Managers who would benefit from his proposed tax breaks, is logically only going to ignore the root of the problem, which is lack of regulation. To say this issue is not tied to politics is ignorant. SEC is nopt supposed to be political, but fact is, it is!
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Rick From
Texas
Sep 21 11:54 AM
Ah, the conservatives, the original masters of throwing one of their own under their own bus, and then telling everyone in the republican party "Don't worry, that was just a speedbump".
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User 266697
Sep 21 12:03 PM
It's time that our government, even though we are a capitalist society, to begin financially aiding and influencing the sectors that could advance our nation back to the top nation in the world. Automakers, energy, (esp. batteries that could propel our cars, and buses. More federal money into public transportation, to include rail. The government over the next 10 years, will make a lot of money on the investments they have made in the economy this last two weeks. Some may say this is socialism, I call it survival in today's global economy.
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pncurtis
Sep 21 12:10 PM
I see a lot of references to politicians of one stripe or the other. That is not what this is about. It is about a lack of integrity from top to bottom. When people figured out that they could earn a commission on the sale of a questionable loan the only thing that changed was the size of the question.

To suggest that one political party or the other is responsible for that is a form of insanity. What we are experiencing is an economic train wreck. In a train wreck no one looks around and asks the person next to them if they are a Republican, a Democrat, or an independent.


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User 266706
Sep 21 12:16 PM
I have no opinion on Cox but he certainly does not deserve what McCain and this author have thrown at him. The Republican mantra of deregulation is responsible and McCain was right behind that. No doubt. Ironic that the ill conceived deregulation in the name of small government and free market is actually enlarging government and creating a government managed market.
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williambanza
i7
Sep 21 12:21 PM
Wall Street, Bush, AAA Lawyers and the Demise of Accountability

We live in a time when political and business leaders are able to avoid being held accountable for their acts of gross negligence and wilful misconduct. Sounds like lawyer talk. Well lawyers are intricately involved in this sorry state of affairs. Lets take the Bush administration. What did all the Republican cronies like Cheney learn from the Nixon saga? Don't put yourself in weak position legally. Don't testify under oath, better yet don't testify. Don't provide information under threat of perjury and obstruction of justice, better yet don't provide information. They have artfully avoided political accountability for a litany of constitutional abuses, executive misconduct and malfeasance. They are also getting AAA legal advice.

OK, now lets consider what has happened in the financial services industry. Until recently, our securities laws forced Wall Street to worry about the way it conducts business. Don't play by regulatory rules with origins in Roosevelt's New Deal and sooner or later the SEC or Elliot Spitzer will hunt you down. You had to worry about adequate disclosure and a battery of rules designed to protect average public investors. If you misbehaved, you also had to worry about a ravenous plaintiff's bar charged with the duty of prosecuting claims on behalf of investors unable to fend for themselves (for a generous fee, of course). More AAA lawyers.

Those New Deal rules are still there. However, Wall Street has managed to water everything down to the point where a manmade Katrina hits the financial markets and there is little or no means to hold the perpetrators accountable. Don't hold your breath waiting for the SEC to chase the bankers that designed, peddled and later lied about their exposure to toxic jackass backed securities. What about Credit Default Swaps? Oh, those so called financial weapons of mass destruction are not securities within the meaning of the securities laws. Those are cutting edge risk management tools. How about victims like poor old AIG banding together to sue those who set them up with these improvised financial explosive devices. Never mind, those were sold to "sophisticated&qu... and "accredited" investors able to fend for themselves. Sales to these financial sophisticates are not subject to the same legal regime. We now see that "sophisticated investor" means one who expects to be bailed out by Uncle Sam. Finally, you won't be seeing any widows and orphans starting class action suits, because no one sold them any securities. Instead, they are accused of being financially culpable in this mess because they fell prey to the army of mortgage brokers who aggressively peddled shadow bank loans. Mortgage brokers owned by who else? Wall Street investment banks like Merrill, Lehman and Bear Stearns. Shadow bank loans? Yep, more AAA legal advice.

Let the markets regulate themselves! That is the fundamentalist mantra of the lords of the Street. Well, that is what the market was actually doing until this past Friday. Self regulation came in the surprising form of punishment by the shorts. After all, it was the hedge fund industry, Messrs Einhorn et al, and not the SEC that called Lehman and AIG to the carpet. Not to worry, Mr. Cox, a Wall Street lawyer who runs the SEC, has fixed the short problem for his former clients/masters. Trading bets against financial institutions are now banned. In a comic twist, the SEC is planning to force hedge fund managers to testify under oath. Something more than you can expect from the likes of Harriet Myers, Esq. and Alberto Gonzalez, Esq. Ultimately, the reckless bets that the investment banks made with shareholder capital will go unpunished. Still more AAA legal advice.

Well you begin to see how what seems like one big scam is actually a legally airtight apparatus for screwing Grandma, Grandpa and Joe public in an indirect manner without being held legally accountable. Time to throw out all of the New Deal regulatory assumptions and start all over again. Wall Street, like the Bush administration, has managed to innovate its way out of corporate accountability-- the old fashioned way: hire innovative AAA lawyers.

One hundred years ago a man named Franklin Keyes, Esq. (you guessed it, a Wall Street lawyer) published a tract titled: "Wall Street Speculation, Its Tricks and Its Tragedies". In it he says: "Wall Street is dominated by some of the brainiest and shrewdest men in the country, natural born sharpers and schemers, and before the average man can get the better of them, except through the merest chance, he will have to eat brain food for a long time." Well said Mr. Keyes. Nothing seems to have changed, particularly the need to hire AAA lawyers.

WilliamBanzai7
September 2008
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carl c
Sep 21 12:22 PM
Yet another shining example of "Great job, Brownie!". The problem, at this point, and the solution is by no means partisan, so let's stop the bickering. Eliminate all corporate lobbying, because both parties have been bought and paid for, period. Money talks.
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MikeBoyScout
Sep 21 12:24 PM
Like it or not, Cox has done/not done exactly what he was hired to do.
The sound you hear are the chickens coming home to roost.

If you bought the free-market mantra that underpinned the hands-off approach (hear no evil, see no evil, speak no evil) you also bought the free-market related securities that come with it....

In other words, you bought into the Hobson's choice of collapse vs nationalization that was bound to come with it.
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nyle
Sep 21 12:34 PM
As far as I know (I could be wrong), it was SEC that allowed the big 5 (i.e bear sterns, lehman, goldman, etc.) and only the big 5 to use a huge leverage in their bets starting in 2004 and the other firms were allowed a lot less leverage. If the big 5 were not allowed this leverage, things might not have gotten so worse.
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User 243313
Sep 21 12:35 PM
Lying short sellers nearly capsized the market. And MM's are as bad. SEC is right but needs to get tougher fast!
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Leaked SEC
Report
Sep 21 12:35 PM
Is it my imagination, or was the "Leaked SEC Report" given above, the only post to accurately describe another SEC failing?
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THE OTHER
SIDE
Sep 21 12:37 PM
This problem started with the Democratic socialistic concept that everyone should be able to buy their
own house, not only people with the money and income to do so. This populist Democratic
concept was backed by President Bush. Various programs were enacted to lower down payments and the income criteria required to buy a house. There were ARMS (temporary reduced interest mortgages), interest only mortgages which never reduced and then those that added interest to the mortgage so they increased each year. Income requirements were ignored for the greater good of equalizing home ownership and Fanny Mae and Freddy Mac authorized to issue these garbage loans with government guarantees.
Then there were the fees, points to the originating broker, points to Fanny and Freddy and the the the Brokerage Houses who pooled the garbage and sold it to Banks, the public and other financial institutions where because of the Government guarantee it counted as capital.
Bush as well as McCain tried in the last 2 years to rein in Freddy and Fanny but the Democratic Congress would not consider it since the were receiving such large contributions not to change the rules, especially Obama. Nor were other Republicans joining either Bush or McCain.
Building boomed to meet the demand as the builders were paid even if the buyer could not pay the mortgage, that was the Banks problem. The Mortgage brokers made out like bandits writing loans to people who had no income, no job and or no assets. They called them Ninja Loans.
The builders supported this program with everyone acting for greed.
The Brokerage houses then took some of these subprime loans and broke them up into various parts and sold these parts like commercial paper. CMO and their ilk which were given investment grade ratings by the rating agencies even though they were sub sub prime loans due to a" purported computer error" and large fees paid to the agencies.
Hundreds of millions of dollars were paid to these "crooks" in fees, bonuses and salary and the parties who bought these investment rated or government guaranteed paper were left with the huge losses as the losses began. The basic premise that began this fiasco also doomed it to failure.
You cannot sell houses to people who cannot afford to carry them.
You cannot have loans originated except by parties who have an economic interest in the future payments made on loans.
The Democratic Congress was in a panic and said they were leaving. Bush forced them to face this disaster under threat of dire political fallout from their prior and current failure to act to correct these problems. Bush's position was the future of the USA outweighed any political advantage to him or the Republican party. There would be no finger pointing and the Democtatic Congress agreed to act.










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User 208512
Sep 21 12:39 PM
Trying to pin the blame on Cox is games-playing baloney.

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websmith
Sep 21 12:42 PM
My Website
These are not failures. These are exactly what was planned.

They scared you enough to give away your liberty, they sacred you enough to give away some of your money to the military industrial complex, they exploited the American Dream to take away most of what you had left, an now they are trying to scare you enough to give away your children's money by threatening you with the disaster you already have if you don't do it. It's time to call their bluff.

All these people had to do was renegotiate loans to ones that could be paid. They would rather die than lose one penny of profit. There is no way to make this good but there is a way to make it not as bad and give your children a fighting chance.

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Peter,
Grvlle, SC
Sep 21 12:46 PM
The SEC is responsible and accountable. As well as the lawyers lobbying for own interest and those that are just sitting on the couch... another hamburger and fries or pizza for me on the couch... ouch but sorry, no sympathy at all.
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Notinthe99pe
rcent
Sep 21 01:03 PM
Was the S.E.C. asleep while Russia attacked????
Many market makers have said major shorts positions came out of Europe not the US. Major US shorts deny involvement. Russia was seeing a massive capital outflow post B.P./TNK dispute and Georgia invasion. While I doubt they initiated the run our market turmoil gave them room to halt trading and make a massive domestic intervention. This intervention was focused on target companies in strategic segments further consolidating state control. It would have been easy to foresee our response leading to a weaker dollar and long term inflationary pressures. Both very helpful to their resource based economy. Also a nice way to weaken the momentum the hawkish McCain developed after the convention. Seems like the type of strategy a judo master like Putin would embrace.
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McViking
Sep 21 01:04 PM
This debacle started 20 years ago with Milken (felon) and a quid pro quo amongst Greenspan and his private equity friends tapping the cookie jar (Federal Reserve). To suggest otherwise and blame Mr. Cox is either naive or continued manipulation.
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Thattvguy
Sep 21 01:07 PM
My Website
RE:
"Wow, those were some very insightful comments made by Obama's trained monkeys. "

Trying to avoid responsibility by name-calling directed at Obama supporters, or claiming that McCain could be at all effective in repairing it after his Keating Five outrage is just the height of insanity.

It would be at least a sign that Republicans had a shred of honor and decency left if people like you people would just own your complicity in this mess, apologize and step aside while you take a long, hard look at yourself and you facist party..

By the way, there hasn't been a bigger threat to national security since 9/11, if not the Great Depression. Where are the calls to charge some of these entities with treason? Does the Patriot Act not have any provision for economic treason? Or is it just structured to benefit non-wealthy, non-connected Americans?

Finally - DO NOT give Paulson unlimited power. He should be indicted, not rewarded with dictatorial powers. The Republican culture of corruption is alive and well in Washington. Throw them all out.
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Miami says
Sep 21 01:09 PM
Have you noticed that large companies over 100 years old were able to manage themselves during the great 1929 depression, but are going broke now in these prosperous times and "fundamentally sound" economy... It is unbelievable that the current government doesn't even recognize the recession (should read: big time depression) it has put us into it...!
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Sugiarto
Setiabudi
Sep 21 01:12 PM
The derivative market is unregulated by SEC,
The root cause of financial crisis is originated by bad mortgage ,collaterized debt obligation,credit default swap etc
All this securities instrument invisible by layman investor or financial regulators all over the world.,due to is dedicated for professionals only
whose act for high net worth prople.


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AZ Realist
Sep 21 01:14 PM
The Bush administration asked Congress to create a new agency to regulate Fannie Mae and Freddie Mac, in September of 2003.
The Bush administration asked Congress to eliminate the power of the president to appoint directors to the companies.
Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee.”
You liberals may not want to believe it but the following link is to your own liberal NYT article that acknowledges it.
query.nytimes.com/gst/...
If the link won’t work than search the NYT for the following article:
“New Agency Proposed to Oversee Freddie Mac and Fannie Mae”

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Tom,
Nashville
Sep 21 01:14 PM
It is truly amazing. Yes, the SEC is the governing body in accounting standards. Way to take into-accounting.

We talk about accountability. How about accountability for each one of us? Those who are ranting probably lost a lot of money. Did you ever consider the fact that there is risk involved in the market? I bet not. Most people are too risk averse to actually be in the market. There was nothing wrong with the financials that Freedie or Fannie or AIG or anyone else presented. At that time, it was an accurate reflection of their company, which is the point of financial statements. It is easy to say in hindsight, they should have not purchased asset xyz, or should have allowed for a larger margin of cushion. However, at the time of the filings there was nothing wrong. Let me repeat that. AT THE TIME THERE WAS NOTHING WRONG. It is possible that the correct decision does not mean that you won't lose. Look at poker for an example. Poker, if you have the best hand showing on the table, you should bet. But if a new card arises that means you lose, it doesnt mean you shouldn't have bet, because at the time, it was the correct move to bet.

Why should Cox, or anyone, "protect" the small time investor? So we should help those who don't take the time to properly analyze things. Everyone wants all reward and no risk. Be accountable for yourself. More regulation is BAD! That leads to the true value of things being distorted. When things are distorted for too long, it will hurt when it reverts to the true value.
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Jay Kay
Sep 21 01:20 PM
Yeah Peter, I couldn't agree with you more. Your first post was dead on. We can't be a great nation by going around giving each other haircuts. I have to laugh at my insurance guy when he excitedly tells me about some new insurance PRODUCT instead of calling it a service. Same with banking products. Like it gives it some substance. Okay, maybe they are products of a devious mind.
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dksneeze
Sep 21 01:23 PM
Hi MEK, I am of course an independent now, in much the same way you couldn't find a Republican in the days after Nixon, so that makes me perfectly unbiased and objective in pointing out my understandings. 1) McCain hasn't been chairman of the Commerce Committee since the Democrats got majority in the Senate 2 years ago; and
2) No less a conservative authority than the WaPo (!) indicates that according to its Web site, the Commerce Committee oversees 13 areas, beginning with the Coast Guard, and continuing through "regulation of consumer products and services ... except for credit, financial services, and housing" -- the very areas now in crisis.

The full list of Commerce Committee oversight areas follows:

1. Coast Guard.
2. Coastal zone management.
3. Communications.
4. Highway safety.
5. Inland waterways, except construction.
6. Interstate commerce.
7. Marine and ocean navigation, safety, and transportation, including
navigational aspects of deepwater ports.
8. Marine fisheries.
9. Merchant marine and navigation.
10. Nonmilitary aeronautical and space sciences.
11. Oceans, weather, and atmospheric activities.
12. Panama Canal and interoceanic canals generally, except as provided
in subparagraph (c).
13. Regulation of consumer products and services, including testing
related to toxic substances, other than pesticides, and except for
credit, financial services, and housing.
14. Regulation of interstate common carriers, including railroads,
buses, trucks, vessels, pipelines, and civil aviation.
15. Science, engineering, and technology research and development and
policy.
16. Sports.
17. Standards and measurement.
18. Transportation.
19. Transportation and commerce aspects of Outer Continental Shelf
lands.



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J dot
Sep 21 01:24 PM
Lets fac facts, the real issue is the insane restructuring of accounting rules requiring that these instrunments be priced to market.

These were longterm holdings that don't always have a price, ges what Sherlock, this is the problem. No one can predict when the market evaporates,when it does the wall comes crashing down.

Regualtors were the cause of the problem, stop calling for more of a failed system.


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Ted Plaut
Sep 21 01:31 PM
When you read Cox's CV. you will notice that his only skill has been Politics and for that matter, he has never distuingished himself in offering any meaningful legistlation. His comments in inteviews with the press are pitiful in their lack of insight or knowledge of what is going on in the market. He is a TRUE representative of the Bush doctrine: loyalty to the party is all that counts!!!
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Quotidian
Sep 21 01:33 PM
It's so convenient to blame one official. The fact is that CONGRESS, Democrat AND Republican are to blame for wallowing in gross deficit financing. Our citizens follow the example set by their leaders. Why vote for McBama, the CAUSE of our difficulties. Surely we can find better.
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Flying Fish
Sep 21 01:37 PM
Called my financial advisor this week for a professional observation on all of this. His reply was, "Not to worry, we will all just have to plan on dying a few years earlier". Bummer, I had planned on the assets outlasting me!
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popolopen
Sep 21 01:41 PM
How did the subprime mortgages come to be made in the first place? In many cases, it was the result of predatory lending: in other words, banks eager for packages of mortgages that they could bundle into investment securities pushed loans at eager homebuyers who often could not afford the loan but who did not understand such features as interest resets after, for example, a low floating or teaser rate period. This often led to tragedy for the homebuyer who subsequently defaulted and walked away. What did the federal government do? The US Comptroller of the Currency thwarted the efforts of State attorneys general to use state consumer protection laws to curb this predatory lending. The Comptroller said, no, no, no, you State attorneys general. You cannot mess with any national banks. They're ours and the rules we make preempt any of your little old state consumer protection laws. Sorry, but you can only regulate banks that have a state charter but not national charter. Resounding applause passed up to the Comptroller from the big national banks: wachovia, fleet, citi, wells fargo, chase, boa and the rest of the crew. The Comptroller's preemption regulations were issued in august, 2004.
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shoelover
Sep 21 01:42 PM
My Website
Markets will indeed regulate themselves and the Fed is about to get a hands on lesson in "regulation" right from the market itself. Such is life, at least we will see a contraction in the money supply and cash will become a valuable asset again as other assets deflate in value.........
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rw93003
Sep 21 01:44 PM
Oh boy, what a blame game......Everyone who thought a 3 BR 1 bath house in CA was worth $800k and next month would be worth $900k is at fault--Adjust the numbers for where you live. The biggest share of the blame goes to the buyers...they tried to make a bundle and now want the rest of us to cover their losses.
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User 266753
Sep 21 01:47 PM
More than one year ago, the SEC asked for public comments re. short selling. Many of us wrote comments decrying the fact that the commission has not been enforcing statutes that prohibit naked shorts.

In response to these concerns, the SEC issued new guides to the DTC saying, in effect, that a naked short position not covered within THIRTY DAYS should be reported to the SEC/ What a complete laugh: the LAW requires covering a short sale in 3 days - not 30!!!
As a follow up to public concerns, the SEC dropped the uptick rule on short sales!!!!!

A consequence of all this is:
1. The small investor has been creamed. Many retirement accounts have been decimated by naked short sellers.
2. Capital formation is being devastated. No small entrepreneur wants to do an IPO in America with the strong probability that hedge funds/dealers will attack any slight error made during the early years of a company like a mad dog with massive short selling, delisting and bankruptcy of even the most promising company. Better to do an IPO in India or other markets where short selling is controlled and naked short selling completely illegal.

The article was completely right. The hedge funds/broker-dealers have the SEC in their pocket. The miscreants/law breakers/ fraudsters are controlling the SEC. If you are a small investor, better to put your money in a mattress, since the SEC enforces only the rules that subsidize the hedge funds.

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Mr.Mad Money
Sep 21 01:50 PM
RTC bailout by Bush Govt should be across the board to all finanacial so small financial co. who are in BK can be revived,

It should be based on *NOL* If financial co has NOL from last year 2007, that is what the maximum bailout should be.

This way we protect the tax payer interest and no one get *FREE* bailout and run away and plus a conditions attached such as long as bailout is not paid back to govt no *BONUS* should be paid to CEO.

In this way bailout with *NOL* be secured capital of tax payer, i.e If the company is profitable in future they can write this bailout with the *NOL* refund they expect to get in later years.
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TheNextGoogl
e
Sep 21 01:54 PM
Change Uptick Rule Back Again- Seeking Alpha chart since gone
"Bad Timing for a Bad Idea"
seekingalpha.com/artic...
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TheNextGoogl
e
Sep 21 01:55 PM
Change Uptick Rule Back Again - Seeking Alpha chart since gone
"Bad Timing for a Bad Idea"
seekingalpha.com/artic...
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IZ
Sep 21 01:57 PM
The partisan mocking and attacks need to be set aside. To the Right: Cox was at best asleep at the wheel and at worst complicit. Though he may not bear singular responsibility for our current situation, he certainly helped to create the environment that allowed it to happen. McCain is correct to call for his resignation. To the Left: Your idea that McCain is somehow the same as Bush is a false argument and specious. Obama is as qualified to run this country as Sarah Palin. Obama claims that running for office makes him qualified. If that argument is true then that makes Ralph Nader 2 to 3 times MORE qualified as Obama to be President. Again - a false argument. Meanwhile, Biden is in bed with the credit card companies. Are these two men who we really want guiding us? These are objective truths based in fact. The only candidate with a track record of bipartisanship is McCain. My comment to America - don't believe the lies that not voting for Obama = racism. This is yet another false argument put forward by the Obama camp. Look at the facts. Look at the records. Look for balanced reporting. The choice for McCain then becomes obvious. Oh - and a footnote: I did not vote for Bush in either of the two elections and I previously supported Bill Clinton.
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ejetto
Sep 21 02:01 PM
The Commodities Futures Modernization act passed into law in December 2000 --otherwise known as the Enron loophole--not only deregulated energy futures but credit swaps as well. This change is regulatory authority was attached as a rider to an appropriation bill by Senator Graham Republican. Attached literally at night just before a congressional recess, it was truly smuggled into law over the objections of the SEC, Commodities Trading Commission and other financial regulators. Of course, Enron- then still a major player- had made contributions to over 200 members of congress.
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repo
Sep 21 02:02 PM
America is bankrupt. The end . Game over.
We are a third world nation.
Major export is debt. Bad debt that will never be repaid!
Hit the reset button.
Vote them out of office.















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User 226214
Sep 21 02:04 PM
It's strange country that SEC don't want to do anything good to prevent "naked short sales" to destroy our economy. It should put a ban of all the publicly trade companies, not only financial companies.


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Slash
Sep 21 02:08 PM
Cox is just one officer in a corrupt army. Blaming him is like blaming the Gestapo commandant for all the abuses of Liebling Germany (Not sure who -- Bush or Cheney -- would be the 'Dolfi' in this metaphor). Many many people, through their actions (or inaction) are to blame for where we are, including a complacent and compliant public.
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TheNextGoogl
e
Sep 21 02:13 PM
Bring Back The Common Shares of Freddie and Fannie - Let WILLING Americans Bail Out America

We're short of money - why not??

So far the Fed Decision Makers Policy is "Only UNWILLING Americans are Allowed to Fund the Bailout. Willing Americans that want to buy the stock are prohibited".
This is the typical insane thiking that got us ito this.
Email Your Senator - Email List
www.senate.gov/general...

"I'm from the government and I'm here to help you" They kill the shares, then they're surprized people don't want to put money in the market - then they're like "Now for some reason the marketis crashing" AND hence the financial system.
Put boy scouts in their place - we'd be better off.
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cleesburg
Sep 21 02:13 PM
I fully agree. This Cox guy is incompetent. The only thing he did while in Congress ten years back was the fabrication of a "China Threat" document for personal political gain.
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NakedShort
Sep 21 02:17 PM
The US have approached its end and will fall permanently. Every system, democracy, socialist or communism, has its inherent defects. Two core issues are valuation and justice systems. Here I just talk a little about valuation problems. Short sellers are gamblers who force US stock market to be a casino. They value nothing, only do betting. I checked more than 10,000 stocks that are traded on the US market. None of stock is at 52-week high. 50% of company's stock decreased more than 50%, 95% fell more than 20%. One of famous websites declared any of stocks that go up must go down! There is a easy way to destroy capitalism--short stocks. This is just how people value things. It is a big issue, but the biggest issues for the US. Right now the US government is trying to save the market. I agree with that this plan only has temporary effect. The key or root cause is how American people value themselves and their life, I mean what they want. This have changed a lot. They want easy life and less responsibility, so they do not work hard, even do not want to work! Bill Clinton is just lucky because of technology advance. Now Obama has no good plan to deal with this problem. American people just bet on him. What is Bush has done during his 8 year tenure? Low tax, low interest rate and big budget deficit. Where did money go?
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off_leash
Sep 21 02:19 PM
I filed a complaint with the SEC back in February about what appeared to be naked short selling in MBIA stock. The reponse I got demonstrates why the SEC is never held accountable for anything.
------------------
*PLEASE DO NOT REPLY TO THIS MESSAGE*
Dear Sir or Madam:
Thank you for your recent e-mail to the group electronic mailbox of the Division of Enforcement at the United States Securities and Exchange Commission in Washington, D.C. We appreciate your taking the time to write to us. This automated response confirms that the Division of Enforcement has received your e-mail. You can rest assured that an attorney in the Office of Internet Enforcement will review your e-mail promptly.

We are always interested in hearing from members of the public, and you may be assured that the matter you have raised is being given careful consideration in view of the Commission's overall enforcement responsibilities under the federal securities laws. It is, however, the Commission's policy to conduct its inquiries on a non-public basis -- so this may be the only response that you receive. If your complaint is more in the nature of a consumer complaint (such as a dispute with your broker or a problem with your brokerage or retirement account), you should contact our Office of Investor Education and Assistance -- they may be able to help you. You may reach the Office of Investor Education and Assistance via telephone at (202) 551-6551or through the Web at HYPERLINK "www.sec.gov/complaint....;sec.gov/complaint.shtm....

The Commission conducts its investigations on a non-public basis to preserve the integrity of its investigative process as well as to protect persons against whom unfounded charges may be made or against whom the Commission determines that enforcement action is not necessary or appropriate. Subject to the provisions of the Freedom of Information Act, we cannot disclose to you any information which we may gather and we cannot confirm to you the existence or non-existence of an investigation, unless made a matter of public record in proceedings brought before the Commission or in the courts.

If you are unsure where you should direct your inquiry or you want to learn more about how the SEC handles inquiries and complaints, please visit the SEC Complaint Center at HYPERLINK "www.sec.gov/complaint....;sec.gov/complaint.shtm....

Should you have any additional information or questions pertaining to this matter, please feel free to communicate directly with us at HYPERLINK "mailto:enforceme...

We appreciate your interest in the work of the Commission and its Division of Enforcement.
Very truly yours,
S/
John Reed Stark
Chief, Office of Internet Enforcement
United States Securities & Exchange Commission
----------------------...
When the FBI investigates serial killers, they always look to the earliest cases where the killer was still learning his craft. Perhaps they should look into MBIA's situation since it has all the same characteristics as the more recent cases with naked short selling, suspicious activity in credit default swaps, and false rumors being circulated.
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NakedShort
Sep 21 02:20 PM
The US have approached its end and will fall permanently. Every system, democracy, socialist or communism, has its inherent defects. Two core issues are valuation and justice systems. Here I just talk a little about valuation problems. Short sellers are gamblers who force US stock market to be a casino. They value nothing, only do betting. I checked more than 10,000 stocks that are traded on the US market. None of stock is at 52-week high. 50% of company's stock decreased more than 50%, 95% fell more than 20%. One of famous websites declared any of stocks that go up must go down! There is a easy way to destroy capitalism--short stocks. This is just how people value things. It is a big issue, but not the biggest issues for the US. Right now the US government is trying to save the market. I agree with that this plan only has temporary effect. The key or root cause is how American people value themselves and their life, I mean what they want. This have changed a lot. They want easy life and less responsibility, so they do not work hard, even do not want to work! Bill Clinton is just lucky because of technology advance. Now Obama has no good plan to deal with this problem. American people just bet on him. What is Bush has done during his 8 year tenure? Low tax, low interest rate and big budget deficit. Where did money go?
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Sick of this
Sep 21 02:21 PM
Dumbocrats and Rebooblicans have done little to help the middle class folks and aren't about to start no matter what they or the Socialistic media care to tell you. Until the age of the " Me Firsters" is over we will continue on down the current path of gimme, gimme, gimme. We got out of the market just ahead of it's precipitous fall and probably won't return. We were just lucky. Not informed. My prayers are for all the millions of middle class people who struggle to get by. The rich get richer and the poor are entitled. God help the working class.
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repo
Sep 21 02:22 PM
The democratic party is the most evil,vile repugnant party to ever stand in the light of day. The republicans are not much better.
Vote No.
No to bailouts of rich bankers
No to Pelosi. No to Reed.
No to Obama and his cronies.
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ET
Sep 21 02:22 PM
Another tremendous problem is that the US Government never developed the technological tools to monitor WS and has no way of now differentiating the true from the false.
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NakedShort
Sep 21 02:26 PM
The US have approached its end and will fall permanently. Every system, democracy, socialist or communism, has its inherent defects. Two core issues are valuation and justice systems. Here I just talk a little about valuation problems. Short sellers are gamblers who force US stock market to be a casino. They value nothing, only do betting. I checked more than 10,000 stocks that are traded on the US market. None of stocks is at 52-week high. 50% of company's stock decreased more than 50%, 95% fell more than 20%. One of famous websites declared any of stocks that go up must go down! There is an easy way to destroy capitalism--short stocks. This is just how people value things. It is a big issue, but not the biggest issue for the US. Right now the US government is trying to save the market. I agree with that this plan only has a temporary effect. The key or root cause is how American people value themselves and their life, I mean what they want. This have changed a lot. They want easy life and less responsibility, so they do not work hard, even do not want to work! Bill Clinton is just lucky because of technology advance. Now Obama has no good plan to deal with this problem. American people just bet on him. What is Bush has done during his 8 year tenure? Low tax, low interest rate and big budget deficit. Where did money go?
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bruin532
Sep 21 02:30 PM
Much of this started in 2002 when Greenspan lowered the FFR to 1% to fire the economy for Bushes re-election. Lets all admit it Bush's Presidency has been a disaster and history will paint him as he worst President in HISTORY. 9/11, Cheneys (deregulated) energy policies, Iraq WMD, Katrina, Justice dept scandle, patrion act, torture, Bank Bailout. 8 years of lies, deception, stonewalling and coruption. My thought let the Banks fail and lets start over with a new Peoples Federal Reserve they dont deserve our money or our support, let free markets govern free markets!
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baruch
Sep 21 02:40 PM
no one had more to do with the subprime mess than obama. he pushed thru the enabling legislation which has destroyed our financial system.


http://seekingalpha.com/article/96487-5-failures-of-sec-chairman-cox