Photo by Jack GouldMainstream reporters said Rep. Christopher Cox "sailed" through his Senate confirmation hearings to become chairman of the Securities and Exchange Commission on Aug. 3. They talked about Cox's smile, family, non-partisanship and commitment to aggressive policing of the nation's financial markets. While the Ayn Rand admirer's family is certainly charming, the rest of it was as fake as his front teeth, allegedly knocked out during a teenage hockey game.
After Senator Richard Shelby (R-Alabama) introduced him at the July 26 hearing, Cox promised that "the focus" of the SEC under his direction will be "vigorous enforcement" of regulations. "The Commission must be vigilant in behalf of investors and stalwart against fraud and unfair dealings," he said. "I unqualifiedly welcome the opportunity to continue to work with each of you for the protection of investors."
Working to protect investors, of course, would be altogether new for the Newport Beach Republican. Before entering politics, he served as legal counsel to William E. Cooper, an Orange County swindler who stole $136 million, mostly from the elderly. In the nine terms he has served in Congress, Cox has repeatedly championed the narrow interests of corporations over their investors; his critics reasonably charge that he helped shape the regulatory environment in which Enron scandals ultimately flourished: in just one case, he politicked against a law that would have required accounting firms to disclose their financial interests in the corporations they audit. In 1994, he angrily predicted on the floor of the House that the Clinton presidency would produce a Great Depression; few men can claim to have predicted with more precision the opposite of what came to pass. In 1996, he backed an energy deregulation plan that cost Californians tens of billions of dollars—and then worked with Republican activists to pin the blame on Gray Davis, the state's Democratic governor.
Little of this came up during the congressman's hearing last week. Shelby called the Cox record "impressive." Sen. Elizabeth Dole preferred "stellar." California Democrats, beholden to Silicon Valley venture capitalists, played along. Sen. Diane Feinstein described Cox as "well-equipped." Without offering supporting evidence, Sen. Barbara Boxer, whom conservatives caricature as something like a communist, claimed that Cox is "for the people; not special interests." Even Democrat Sen. Charles Schumer, who often opposes President George W. Bush's weak nominations, caved. "Everyone knew Cox was pro-business," said the New York senator with close ties to Wall Street. "But an examination of [his] record indicates [he's] pro-regulation too."
If Cox now truly favors investors and enforcement, explain this: Why did thousands of corporate lobbyists—the fellows who seek a weakened SEC and noisily cheered Cox's June nomination—remain silent during the congressman's alleged evolution at the confirmation hearings?
Answer? Because the repackaging was a bipartisan sham. Executives at TheOrangeCountyRegister—Cox's conservative hometown newspaper—argue that business executives behave ethically without SEC oversight. They didn't say a word about the "new" Cox. Instead they published Denis Bunis' July 30 hagiography, with the newsflash that congressional staffers soon will no longer say "Congressman Cox's office" when they answer the phones for California's 48th Congressional District office.
Outgoing SEC Chairman William Donaldson didn't receive accolades from corporate lobbyists as he departed. They despise him. Donaldson often sided with pro-law-enforcement commissioners at the agency. An accomplished businessman and Republican, he wanted higher ethical standards and more honest public disclosure following the Enron, MCI Worldcom, Citigroup, Global Crossing and Tyco scandals.
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In the wake of the scandals, Donaldson's bare-fisted approach to corporate wrongdoing increased investor confidence—and led to a relatively stable financial market. But bowing to corporate pressure, the Bush White House wanted Donaldson gone. The president now turns the SEC over to the biggest congressional opponent of Donaldson's reforms.
Asked by Maryland Sen. Paul Sarbanes, the ranking minority member of the Senate banking committee, how the commission will be different under his leadership, the normally loquacious Cox said, "I don't know." Sarbanes pressed: Do you agree or disagree with Donaldson's philosophy? Cox flashed his toothy smile and chuckled but refused to say. Sarbanes, author of the post-Enron reform law known as Sarbanes-Oxley that Donaldson favored, tried again. Can investors count on you to police corruption?
Cox, the man who sponsored federal laws that give loopholes to corporate crooks and weakened the ability of cheated investors to recover losses, laughed again. "Of course," he said. "Solid values, that's the American way."