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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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From: TFF5/8/2008 2:57:04 PM
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SEC's Cox calls for better oversight of Wall Street banks

The Securities and Exchange Commission or some other financial regulator should be given clear authority to oversee all operations of Wall Street's largest investment banks, SEC Chairman Christopher Cox said Wednesday.

In a speech to a meeting of the Security Traders Association, Cox said voluntary consolidated oversight of such banks by the SEC "is no longer enough" and he called for Congress to plug a regulatory hole "very soon."

Cox pointed to the mid-March collapse of Bear Stearns Cos. as evidence of the need for stronger regulatory authority. Bear was one of five investment banks that voluntarily agreed to consolidated oversight by the SEC, giving regulators insight into operations aside from brokerage operations, which are SEC regulated.

While the voluntary program proved to be helpful, "it did not prevent the loss of a major investment bank," Cox noted. He said consolidated oversight of U.S. investment banks remains in a "statutory no-man's land," which "should not be tolerated indefinitely."

The regulatory hole was created by Congress when it deregulated Depression-era banking laws in 1999 without assigning responsibility for consolidated oversight to the SEC or a bank regulator. Although the SEC sought to fill the hole with its voluntary oversight program, Cox termed the patchwork approach "dangerously inadequate and behind the times."

"It's difficult for anyone to say that the system works or that the regulatory gap that exists in statute lacks any consequence," Cox told reporters after his prepared remarks.

Bear's rapid collapse also highlights the need for public disclosure of information on capital and liquidity at investment banks, Cox added. He said the SEC collects such data already and plans to begin releasing such information to the public later this year.

Cox told reporters the idea is to provide "current information to the markets" on the remaining banks in the voluntary oversight program: Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Merrill Lynch & Co., and Morgan Stanley.
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