John McCain took plenty of flak for proposing to fire Chris Cox of the SEC. Now there is reason to think he was on the money. This Wall Street Journal story (subscription required) tells the story:
The Securities and Exchange Commission missed “numerous potential red flags” leading up to the shotgun sale of Bear Stearns Cos., and failed to require the investment bank to rein in its risk taking, according to a scathing report from the agency’s inspector general. Inspector General David Kotz said it is “undisputable” that the SEC “failed to carry out its mission in its oversight of Bear Stearns.” Bear Stearns, one of the most aggressive investment banks, agreed to be sold to J.P. Morgan Chase & Co. in March after the firm’s clients fled and it was running out of cash.
. . .
“These reports could be the nails in the coffin for the agency, said Jacob Frenkel, a former SEC enforcement attorney. . . According to the inspector general’s report, the SEC “made no efforts” to require Bear Stearns to reduce its debt or raise money, failed to take steps after identifying “numerous shortcomings” in the Bear Stearns’ risk management of mortgages and also “missed opportunities” to push Bear management to address the problems.”
Cox, the report says, defended his actions and contended that he lacked sufficient authority.
But let’s be clear: McCain’s ire was not without a lot of merit and there is voluminous information to confirm his position. Perhaps pundits who were unduly harsh about McCain might reconsider in light of the available facts.