CEDAR RAPIDS, Iowa (Reuters) - Republican presidential candidate John McCain said on Thursday he would, if elected, fire U.S. Securities and Exchange Commission Chairman Christopher Cox for failing in his oversight of Wall Street.
“The Chairman of the SEC serves at the appointment of the president and in my view has betrayed the public’s trust,” McCain told a rally in the electoral battleground state of Iowa. “If I were president today, I would fire him.”
The comments by McCain, who portrays himself as a maverick in his bid for the White House, contrasted with the view of fellow Republican President George W. Bush, who appointed Cox to the SEC post in 2005.
White House spokeswoman Dana Perino, asked after McCain’s remark whether Bush had confidence in the SEC chairman, said: “Yes.” Cox, a former Republican lawmaker, has been helping the administration grapple with the financial market turmoil.
The Arizona senator, who faces Democratic rival Barack Obama in the November 4 election, also called for a new Mortgage and Financial Institutions (MFI) trust to work with regulators and the private sector to strengthen weak financial institutions before they become insolvent.
“For troubled institutions this will provide an orderly process through which to identify bad loans and eventually sell them,” McCain said.
“The MFI will enhance investor and market confidence, benefit sound financial institutions, assist troubled institutions and protect our financial system, while minimizing taxpayer exposure.”
McCain said the SEC had left in place trading rules that let speculators and hedge funds turn the markets into a casino.
“They allowed naked short selling — which simply means that you can sell stock without ever owning it,” he said.
He criticized the SEC for abandoning the “uptick rule” which only allowed short sales when the last sale price was higher than the previous price.
“Speculators pounded the shares of even good companies into the ground,” said McCain.
McCain’s criticized Cox on the day that new SEC rules took effect making it more difficult for traders to knowingly make abusive short sales, a practice which is already illegal.
Cox said on Wednesday evening he was also asking his fellow commissioners to consider rules that would expose the short trading positions of major investors like hedge funds.
Short sellers arrange to borrow shares they consider overvalued and sell them in hopes of making a profit when the price drops. It is a legitimate form of trading that can prevent stocks from being overvalued, but often is blamed when a company’s shares fall.
The SEC action followed Monday’s bankruptcy filing by investment bank Lehman Brothers Holdings and Tuesday’s $85 billion government rescue of insurer American International Group.
McCain accused his rival Obama of trying to use the financial crisis for political gain.
Reporting by Jeff Mason and Jeremy Pelofsky; Editing by Tim Dobbyn, Patricia Wilson and David Storey