Brooksley Born, former head of the CFTC and now a member of the Financial Crisis Inquiry Commission, finally had her chance to stick it to Chris Cox.
Cox, then a member of Congress and the chairman of the Task Force on Capital Markets, vehemently opposed the regulation as did Alan Greenspan, Larry Summers and Robert Rubin. Well, we know what kind of havoc unregulated OTC derivatives have caused since then.
Cox, testifying today in front of the FCIC, conceded it was probably a turf battle between the SEC and the CFTC that caused him and others to completely write-off Brooksley’s suggestions. “I’ve had the chance to review the debates we had,” Cox told Born at the hearing. “There was a lot of pride of brand at both the CFTC and the SEC” and the failure to take Born seriously “flowed from an our team is better mentality.”
Cox also blamed turf battles between various Congressional committees for missing the chance to regulate OTC derivatives. “Congress was incapable of regulating on the subject,” he told the commission.
Update: Paul Wilkinson, a former SEC staffer who worked under Cox, has pointed out that Cox never opposed derivatives regulation. As a member of Congress, he did not express a view one way or the other on derivatives regulation. That didn't come until 2008, when then SEC chairman Cox urged Congress to regulate derivatives. We regret the mischaracterization of Cox's views.