SEC chief defends response to economic turmoil

WASHINGTON (Reuters) - U.S. Securities and Exchange Commission chairman Christopher Cox, responding to heavy criticism, said in an interview published on Wednesday he takes pride in his response to the U.S. financial crisis.

"What we have done in this current turmoil is stay calm, which has been our greatest contribution -- not being impulsive, not changing the rules willy-nilly, but going through a very professional and orderly process that takes into account unintended consequences and gives ample notice to market participants," Cox told The Washington Post.

This caution "has really been a signal achievement for the SEC," said Cox.

"When these gale-force winds hit our markets, there were panicked cries to change any and every rule of the marketplace: 'Let's try this. Let's try that.' What was needed was a steady hand," he said.

The SEC, created after the 1929 stock market crash to police markets and restore investor confidence, has come under heavy criticism after the Wall Street meltdown and financial scandals exposed lapses in its oversight.

Cox last week acknowledged that the SEC had failed to detect the alleged $50 billion fraud by disgraced Wall Street investment manager Bernard Madoff, despite many warnings.

Cox told The Washington Post the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks.

Cox told the newspaper he had been under intense pressure from Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to take this action and did so reluctantly.

They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.

Cox, a former California Republican congressman, argued that the SEC has carefully defined responsibilities and that it was unfair to blame it for every problem on Wall Street.

Cox became SEC chairman in mid-2005. He plans to step down early next year before his five-year term expires.

President-elect Barack Obama has chosen Mary Schapiro, chief executive of the Financial Industry Regulatory Authority and a former SEC commissioner, to replace him.

(Reporting by Joanne Allen; Editing by Alan Elsner)