Saturday, September 20, 2008

Villain of the Day: The SEC?

A lot has been made of John McCain's statement that SEC chairman Cox should be fired. I thought it was a silly demand - after all, a lot of what happened is not Cox's fault. Until I saw this, from the Maudlin newsletter:
It is going to cost the taxpayers a lot of money. While I think the losses on AIG will be rather minor in the grand scheme of things, if you add up Fannie and Freddie and a new RTC, coupled with the stimulus package, you can easily get to $500 billion, and that is probably a low number. For such a price, we had better get a new regulatory scheme which requires reduced leverage. Want to get really mad? Up until 2003, all investment banks were allowed only 12 to 1 leverage. Then in 2004, the SEC basically gave five banks (and only five banks) the ability to lever up 30 or even 40 to 1. Bet you can guess the five banks. Bear, Lehman, Merrill, Morgan and Goldman. Three down.



Anonymous said...

I remember reading this too. Turns out that Cox was NOT the head of the SEC at that time.
Attached article -,8599,1843519,00.html


Karthik said...

Sid, I couldn't get to the link, but I looked it up, and you're right. Cox was not the head at that time. Thanks for pointing that out!