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In context, however, Cox's sermonette borders on the absurd. Cox himself is the lamest of lame ducks and has at best a few more months paddling around his office. His agency over the past month or so has effectively been relegated to second-tier status, with primary responsibility for its most important firms taken over by the Federal Reserve. The SEC has been hammered by a report from its own inspector general arguing that it buried serious problems with failing Bear Stearns Cos., and Cox himself has admitted before Congress that the SEC's compliance with Wall Street's desire to boost leverage was "unfortunate." The SEC has been nearly invisible in the bailout activities of the Fed, Treasury and the Federal Deposit Insurance Corp. Indeed, Cox has been criticized by former SEC chiefs for appearing to passively let the agency be subsumed by other supervisory bodies, like the Fed. And of course Republican presidential candidate John McCain would like to fire him. No matter. Beginning with a speech in early October, Cox has been making a play for SEC oversight of CDS contracts. On a positive note, this would give the commission a new mission. But nearly everything else about this campaign is lame. Neither Cox or the SEC has ever put out a warning about the dangers of derivatives, although it is true that the SEC and the CFTC have long skirmished over turf, with the SEC often treating the CFTC as if it were some junior associate (and there has been talk of merging the CFTC and the SEC). In making his play, Cox is also stirring up a turf battle with the mighty Fed, which (not necessarily to its credit) has been trying to get a CDS clearinghouse up and running since 2004 and now seems to be making progress. But generally, the SEC has never displayed much in the way of expertise on these matters except a ritual adherence to "transparency." Cox's CDS land grab smacks of desperation. There are times when Cox has been demonized far more than he deserves. After all, he wasn't around when the roots of so many of these problems were planted. But he came into office as a fervent if standard-issue deregulator, his tenure (before the meltdown) characterized by the attempt to play one interest off another, and he has been incredibly passive in the face of Treasury Secretary Henry Paulson's desire to save the world with the Fed. Derivatives regulation, including CDS is -- as he notes -- a giant hole in the American regulatory scheme, which nearly everyone this side of Joe the Plumber knows. There are real questions about CDS regulation, which will take place in some form. The CFTC, with the exception of Brooksly Born's famous attempt at regulating derivatives in the late '90s, which was swatted down by former Federal Reserve Chairman Alan Greenspan and friends, has always been extremely industry friendly. The Fed, which does have an expertise in clearinghouses and complex instruments, was, however, under Greenspan, the center of resistance to derivatives regulation; besides, giving it that assignment would truly centralize finance and monetary oversight, which Paulson seems to favor, but which has as many negatives as positives. What makes more sense here -- though it's a lot more work -- is a radical rethink of financial regulation that posits a new regulator that specializes in the vast array of abstract synthetic instruments, from CDS to CLOs to CDOs to all customized OTC derivative instruments. Building the clearinghouses, creating as real time as possible reporting, standardizing contracts, monitoring new instruments and cooperating with key regulators at home and abroad is a vast and essential task. In the 1930s, the regulator now known as the SEC actually began work within the Federal Trade Commission. But it was only when the new commission was freed did it truly flourish. That may well be what these times demand as well, though Cox won't be around to play a role. - Robert Teitelman See Cox's op-ed from The New York Times Robert Teitelman is the editor in chief of The Deal. CategoriesComments Deal Video
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Securities and Exchange Commission Chairman Christopher Cox popped his head up this weekend with an 
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Paulson and Bernake like a WWF tagteam. Credit is the problem since we basically broke