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Cox in the Henhouse

Even his supporters acknowledged that former U.S. Rep. Christopher Cox was a controversial nominee to chair the Securities and Exchange Commission. A former corporate lawyer who had collected millions of dollars from business interests, wealthy CEOS and some of the country's most prominent stock-market manipulators during eight campaigns for the House, Cox arrived with precisely the wrong resume for the head of an agency that is supposed to regulate the corporate sector and Wall Street. As such, his nomination represented a presidential poke in the eye to workers seeking protection of their pensions, small investors worried about being defrauded and consumers.

Of course, conservative Republicans in the Senate were enthused about Cox's nomination. After all, the California Republican was a key player on the supply-side economic team, someone who had in the House sponsored legislation designed to make it harder for shareholders to sue corporations that engage in scandalous practices. He has, as well, been one of the Congress's most ardent defenders of "creative bookkeeping" by the nation's top corporations -- supporting schemes such as the one that allowed corporations that pay employees with stock options to avoid reporting those payments as expenses against their bottom lines.

But how could responsible Republican, Democratic and independent members of the Senate ever approve an SEC nominee who, when he was a securities lawyer in the 1980s, worked for First Pension Corp., a company that was accused by the government of bilking investors, that was sued by the SEC for fraudulent activity and that saw its founder plead guilty to charges of felony wrongdoing? How could any member of the Senate who was not completely in the pocket of the securities industry vote for a nominee who the watchdog group Public Citizen described as "a defender of corporate interests whose legislative record indicates he would not protect investors if he were confirmed"?

John Nichols

July 31, 2005

Even his supporters acknowledged that former U.S. Rep. Christopher Cox was a controversial nominee to chair the Securities and Exchange Commission. A former corporate lawyer who had collected millions of dollars from business interests, wealthy CEOS and some of the country’s most prominent stock-market manipulators during eight campaigns for the House, Cox arrived with precisely the wrong resume for the head of an agency that is supposed to regulate the corporate sector and Wall Street. As such, his nomination represented a presidential poke in the eye to workers seeking protection of their pensions, small investors worried about being defrauded and consumers.

Of course, conservative Republicans in the Senate were enthused about Cox’s nomination. After all, the California Republican was a key player on the supply-side economic team, someone who had in the House sponsored legislation designed to make it harder for shareholders to sue corporations that engage in scandalous practices. He has, as well, been one of the Congress’s most ardent defenders of “creative bookkeeping” by the nation’s top corporations — supporting schemes such as the one that allowed corporations that pay employees with stock options to avoid reporting those payments as expenses against their bottom lines.

But how could responsible Republican, Democratic and independent members of the Senate ever approve an SEC nominee who, when he was a securities lawyer in the 1980s, worked for First Pension Corp., a company that was accused by the government of bilking investors, that was sued by the SEC for fraudulent activity and that saw its founder plead guilty to charges of felony wrongdoing? How could any member of the Senate who was not completely in the pocket of the securities industry vote for a nominee who the watchdog group Public Citizen described as “a defender of corporate interests whose legislative record indicates he would not protect investors if he were confirmed”?

The answer to that question is: without so much a blink of the eye.

The Cox nomination sailed through the Senate Banking Committee in late July after the nominee promised to be “vigilant.”

Then, as the Senate raced to finish business before the August recess, Cox was approved by a voice vote to take charge of what is supposed to one of the nation’s premier regulatory agencies.

No one, not one Democrat, not one maverick Republican, not one honest conservative who cared enough about capitalism to stand up for small investors, bothered to ask for the recorded vote that might have at least told the fox he was being watched as he entered the henhouse.

If the United States had a Senate that actually took its advice and consent duties seriously, or if, and of course this is a very big “if,” the country actually had an opposition party, a serious debate over the Cox nomination would have provided a golden opportunity to discuss the influence of money on not just politics but policy.

In the 70-year history of the SEC, Cox is the first member of Congress to be nominated to head the regulatory agency.As such, he is the first SEC chair who will find himself in the position of regulating companies that donated substantial amounts of money to his campaigns.

How substantial?

In 2004, Cox easily defeated a Democratic challenger, John L. Graham, who raised a sum total of $40 dollars for his campaign.Cox raised $1,120,427 and spent $1,038,914. The Republican collected $461,968 from business-linked political action committees for the campaign. Donors from the financial-services and insurance industries were the most generous to Cox, writing checks for a hefty $180,025. Lawyers and lobbyists, many of them tied to the financial-services industry, chipped in another $79,094.

That’s a lot of money to take from folks who Cox now promises to vigilantly monitor and regulate. But the 2004 reports only give a small indication of the extent to which Cox relied on industries that are regulated by the SEC to finance his campaigns. During the course of his Congressional career, the new SEC chair collected $1,256,891 from the financial services and insurance industries — with $632,289 coming from political action committees and $624,602 from individual donors. Cox got another $439,350 from lawyers and lobbyists.

The donors got what they paid for. According to Public Citizen, “On major legislation of interest to investors in recent years – the Private Securities Litigation Reform Act, the Sarbanes-Oxley Act and retirement investment protection matters – Cox cast only one vote out of 22 – 4.5 percent (of all votes cast) – in support of investors.”

That should have caused the Senate pause.

Instead, Cox was approved without debate and without a recorded vote.

In a statement opposing the Cox nomination, Public Citizen President Joan Claybrook said, “The United States cannot afford to have an SEC chairman who doesn’t put investors first. Given the recent corporate crime wave and the enormous financial losses that so many Americans have sustained because of corporate misdeeds, it is essential that the SEC be headed by someone who will look out for the average investor.”

Claybrook was, of course, correct. But the way in which the Cox nomination was so casually approved points to an even more important observation: The United States cannot afford to have a Senate that doesn’t put investors first. Given the recent corporate crime wave and the enormous financial losses that so many Americans have sustained because of corporate misdeeds, it is essential that the Senate be made up of members who will look out for the average investor.

At this point, the Senate is suffering from a severe, make that complete, shortage of such members.

John NicholsTwitterJohn Nichols is a national affairs correspondent for The Nation. He has written, cowritten, or edited over a dozen books on topics ranging from histories of American socialism and the Democratic Party to analyses of US and global media systems. His latest, cowritten with Senator Bernie Sanders, is the New York Times bestseller It's OK to Be Angry About Capitalism.


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