McCain vindicated? Not so fast

Over at Instapundit, Glenn Reynolds reads the admission that 'voluntary' regulation was flawed from conception as evidence that John McCain was right to call for the resignation of the SEC chairman, Chris Cox. As I've noted, George Will and others attacked McCain for this, calling it scapegoating and a sign of a troubling temperament. So, does Cox's admission, and the inspector general's report, prove his culpability and vindicate McCain's judgment?

While I can see why the McCain campaign would like that reading, I don't find it well supported by the specifics of the story. The program was created prior to Cox's arrival at the SEC, so it wasn't his idea. No sign that he didn't like the idea, but then the idea of making compliance voluntary was congenial to many in the GOP and on Wall Street. Links to news reports of John McCain criticizing the program would be a lot more convincing in establishing his bona fides on the issue. Meanwhile, it's hard to single out Cox for a program started by his predecessor and supported, either actively or tacitly, by most of the GOP, which controlled both the executive and the legislative branch in 2004.

To me, the most telling part of the Times story is its explanation of why the SEC would be inclined to implement a program of voluntary regulation in the first place:

Because it is a relatively small agency, the S.E.C. tries to extend its reach over the vast financial services industry by relying heavily on self-regulation by stock exchanges, mutual funds, brokerage firms and publicly traded corporations.

The program Mr. Cox abolished was unanimously approved in 2004 by the commission under his predecessor, William H. Donaldson. Known by the clumsy title of “consolidated supervised entities,” the program allowed the S.E.C. to monitor the parent companies of major Wall Street firms, even though technically the agency had authority over only the firms’ brokerage firm components.

The commission created the program after heavy lobbying for the plan from all five big investment banks. At the time, Mr. Paulson was the head of Goldman Sachs. He left two years later to become the Treasury secretary and has been the architect of the administration’s bailout plan.

The most obvious point to be made is that the man who is supposed to lead us out of this mess was one of the prime architects of the mess in the first place, prior to his moving through the revolving door from Goldman Sachs to Treasury. But the less obvious point is that the SEC lacks sufficient budget and staff to do its job without relying on self-regulation. This isn't an accident, but yet another instance of the Republican effort to incapacitate the regulatory agencies of the federal government. Beginning with the Reagan Administration, which came into office declaring that government isn't the solution, it's the problem, Republicans have systematically worked to reduce enforcement budgets for federal regulatory agencies and to place at their heads individuals who are hostile to those agencies' purposes (e.g., Clarence Thomas as head of the EEOC). So, while Cox surely has some responsibility for the debacle, he has to share the burden with all of those who advocated for getting government "off the backs" of the people (and the corporations) by eliminating regulation where possible, and knee-capping enforcement everywhere else. That group, IMHO, also would include Clintonite/DLC Democrats who helped to triangulate us into this mess.