Nobody will be surprised at this, because I am so openly a fan of SEC Chairman Chris Cox, but it is worth positing that if the current financial woes had hit about 18 months later, Cox would have been in position to do a lot more to head them off — in part because of reforms Cox already was in the process of making. Here’s yesterday’s testimony by Cox to the Senate Banking Committee, which shows a man firmly in control and readily believable, somebody who inspires confidence. It is worth noting several things: First of all, Cox mentions that new technology allows for greater success in tracking down illegal rumor-mongers/stock manipulators. What he doesn’t say is that until Cox joined the SEC three years ago, the SEC was backwards technologically, and that it was specifically because of reforms pushed by Cox — who long was by far the most tech-savvy member of Congress — that the SEC has such technological prowess. Critics who don’t know better will say tht Cox, on this front and on others, is fixing the stables after the horse is out of the barn. What they miss is that the sort of stuff Cox has done in response to the Bear-Stearns mess and other problems is stuff he was already working on before Bear Stearns collapsed, stuff nobody had worked on before, and that the measures he has implemented would have been implemented, under his direction, regardless of whether Bear Stearns collapsed or not; in short, he anticipated some of the problems and for the first time ever was getting the SEC in position to head them off, but the problems happened first. Another few months and the safeguards would have been in place — or, put another way, if Cox had taken over the SEC in, say, 2003 instead of 2005, the safeguards probably would have been in place.
Likewise, he had begun asking for more statutory authority vis-a-vis investment banks before the Bear Stearns mess; as even Chuck Schumer noted, Cox can’t be blamed for not exercising authority he didn’t have in the first place. He now is getting that authority, via congressional action.
Finally, there may be some question about his announcement yesterday of new rules against naked (or semi-naked) short selling. Some critics have called it a panic move. It’s just the opposite: It is the result of a longstanding Cox belief that short-selling can be abusive. I know this personally because of a small project I worked on with Cox when I was Bob Livingston’s press secretary, during which I heard first-hand, in private meetings, Cox’s strong beliefs on this issue. For the record, I agree with him: Short-selling is a form of market manipulation that amounts to betting against a company and in effect against the whole economy. If I remember correctly, the great James Glassman (longtime media giant and AEI fellow) once called short-selling, (and this is a quote from memory so it might be not exact, but the words I remember were:) “fundamentally unpatriotic.” At the very least, the short sale itself ought to be done with actual, honest-to-goodness stocks, not with phantom stocks that haven’t actually been borrowed yet. (It’s sort of complicated stuff; if you don’t understand the lingo, I suggest you do a web search for “short selling.”)
All of which is to say that, watching the video linked above makes me sorry that Cox is relegated to talking about such technical stuff rather than outlining economic policy more generally. He is articulate and persuasive, but he suffers from a degree of fastidiousness that means he is hyper-vigilant against stepping outside of the bounds of his own authority. He just will not allow himself to be seen encroaching on somebody else’s turf. More’s the pity: He could do the cause a lot of good if he were out front in proposing and explaining the sound economic policies he has always believed in and that he effectively promoted in Congress.
