Monday, September 15, 2008

Where's Chairman Cox and the SEC?

Listening to the story of the SEC and Chairman Cox in this weeks “This American Life” brought up striking reminders of Michael Brown, FEMA and the disaster of disaster management that accompanied Hurricane Katrina in 2005. Michael Brown and Christopher Cox are evidence of and extreme neoliberal ideology that pervades the Bush administration.

The current financials crisis that is melting down Wall Street is worse now because regulators like Chairman Cox’s SEC and the FDIC haven’t been doing their jobs. Instead his lack of action is reminiscent of the the neoliberal idea that government should have little or no input in markets, an extreme position that believes that regulation leads to inefficient markets and bloated government.

How concerned is Christopher Cox with doing his job?
One Friday in March, with investment bank Bear Stearns Co. teetering toward collapse, the chieftains of U.S. financial regulation dialed into a 5 a.m. conference call to craft a bailout plan. When they were done, the Treasury secretary informed the president. The head of the Federal Reserve Bank of New York called Bear Stearns.

Christopher Cox, chairman of the Securities and Exchange Commission, didn't call anyone. Though the SEC was Bear Stearns's regulator, he didn't take part in the meeting.

In an interview, Mr. Cox said the time of the call changed overnight and no one told him. SEC staff members were on the early call and Mr. Cox says he was involved in calls later that day and throughout the weekend with his peers.

Big crises put Washington's regulators to the test. At pivotal times during the current financial turmoil, Mr. Cox has appeared peripheral. The next night, as Fed and Treasury bosses negotiated a bailout, Mr. Cox was at a birthday party. He was missing from a Sunday conference call announcing the sale of Bear Stearns and the Fed's plan to lend funds to investment banks. The following weekend, he left town for a family vacation.
In Cox’s own words “markets should be efficient, competitive, transparent, and free of fraud.” Citing potential problems with government own investments Cox says: “If government-owned investments lack transparency, they could contribute to market volatility stemming from uncertainty about the allocation of their assets.” Isn’t this also true with private investments? Since the start of the break down a year ago rumors, and blatant manipulations have been floated around wall street with impunity. Illegal statements made by corporate executives in an attempt to stave of disaster and help insiders have been made time and time again with no SEC enforcement actions to be heard of. In Enronesque fasion companies throught the markets have illegally misreported their financial situation in order to manipulate their stock price.

Where’s the transparency Mr. Cox? In a large part the lack of transparency is what’s destroying our markets. With full disclosure and a better understanding of each companies financial situation capital would have a place to go. But as it is, uncertainty is eating away at the entire market.

The ironic result of all this is that we’ve now come full circle, and are as far away from the neoliberal ideal as possible. With government take-overs of companies that are supposedly “too big to let fail” we are setting ourselves up for an even greater disaster when the money runs out or the debt reaches too high. We are now headed toward more of a Corporatic welfare state or the ultimate in corporate socialism where the government is inherently tied to propping up and maintaining the welfare of corporate interests at the cost to the people.

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