McCain says he would fire Republican SEC chief Cox

CEDAR RAPIDS, Iowa (Reuters) - Republican presidential nominee John McCain said on Thursday a top Bush administration official should be fired for failing to regulate Wall Street and allowing markets to be used as a casino.

McCain's blunt call for the firing of Securities and Exchange Commission Chairman Christopher Cox allowed him to try to separate himself further from President George W. Bush at a time when Democrats want to portray McCain as a clone of the unpopular Republican leader.

It was also a bid to seize the initiative on the top issue for voters after Democratic rival Barack Obama accused McCain of being out of touch when he said this week the fundamentals of the reeling U.S. economy are strong.

"The chairman of the SEC serves at the appointment of the president and in my view has betrayed the public's trust," McCain said. "If I were president today, I would fire him."

Presidents do not have the authority to fire the SEC chairman, but they can take away the chairmanship from a commissioner and can request his or her resignation.

Obama, at a rally in Espanola, New Mexico, tried to raise doubts about McCain's commitment to tighten regulations on the financial industry as he has proposed, saying McCain has long been a proponent of deregulation.

"You can't erase 26 years of support for the very policies and people who helped bring on this disaster with one week of rants," Obama said.

In response to McCain's call for getting rid of the SEC chairman, Obama said: "Here's what I say -- in 47 days you can fire the whole trickle-down, on-your-own, look-the-other-way crowd in Washington who have led us down this disastrous path. Don't just get rid of one guy."

EDGING AHEAD

As a flurry of new polls showed Obama edging ahead of McCain in their closely fought race, McCain sought to tie Obama to some of the people involved in the financial chaos that is threatening the U.S. economy.

He said Obama has received more campaign contributions from executives at troubled mortgage giants Fannie Mae and Freddie Mac than any other senator except one. The government had to bail out Fannie and Freddie earlier this month.

The attack came a day after Obama accused McCain's campaign of being led by Washington lobbyists and said if McCain wanted to take on the "old boys' network," all he needed to do was call a staff meeting.

"While the leaders of Fannie and Freddie were lining the pockets of his campaign, they were sowing the seeds of the financial crisis we see today and enriching themselves with millions of dollars in payments. That's not change, that's what's broken in Washington," McCain said.

Cox, a Republican and a former member of the House of Representatives from California, is in charge of the SEC, a government agency responsible for protecting investors and maintaining orderly financial markets.

"The primary regulator of Wall Street, the Securities and Exchange Commission kept in place trading rules that let speculators and hedge funds turn our markets into a casino," McCain told a rally in the electoral battleground state of Iowa.

The White House appeared to have been surprised by McCain's strong words about Cox. Spokeswoman Dana Perino said Bush backed Cox and had confidence in him. Cox rejected McCain's attack and said he intended to stay in his job until Bush's term ends.

TROUBLED INSTITUTIONS

The Arizona senator, who faces Obama in the November 4 election, also called for a new Mortgage and Financial Institutions trust to work with regulators and the private sector to strengthen weak financial institutions before they become insolvent.

McCain was trying to get out in front on the debate over how to restore health to the U.S. economy and demonstrate he is more capable of doing it than Obama, who polls show has a higher trust level on handling the economy than McCain.

New public opinion polls showed Obama retaking a slight lead over McCain after the Republican had soared ahead in the days after his nominating convention in Minnesota and his selection of Alaska Gov. Sarah Palin as his vice presidential running mate.

Palin, with McCain on the campaign trail, attacked the Democratic vice presidential running mate, Sen. Joe Biden, for having told ABC's "Good Morning America" that it is a "patriotic duty" for wealthier Americans to pay higher taxes.

Obama says he would raise taxes for those making more than $250,000 a year and give a $1,000 tax cut to working families.

"Our opponents, they have some strange ideas about raising taxes. To them, raising taxes -- and Joe Biden said it again today -- raising taxes is about patriotism. This isn't about anyone's patriotism. It's about Barack Obama's poor judgment," she said.

McCain's criticism of Cox came the same day new SEC rules took effect, making it more difficult for traders to knowingly make abusive short sales, a practice already illegal.

(Additional reporting by Caren Bohan and Jeremy Pelofsky, writing by Steve Holland, editing by Philip Barbara)