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The President's Authority to Fire the SEC Chair -- One Paper Makes a Correction:

After Senator McCain announced that he would fire SEC Chair Chris Cox, many media outlets (wrongly) reported that the President lacks such authority. In fact, the President can remove the Chair of the Commission for cause, and may remove a Commissioner for cause. Nonetheless, the likes of Keith Olbermann mocked Senator McCain's comments, even though McCain was essentially correct (and the NBC News correspondent upon which Olbermann allegedly relied had been told as much by yours truly the same day Olbermann went on the air).

Few media outlets ever corrected their error. Thus it's notable that the LA Times ran the following correction in yesterday's paper.

SEC chairman: Articles in Section A on Sept. 19 and 20 about the financial rescue plan said the president could not fire the chairman of the Securities and Exchange Commission. The statute governing the SEC does not explicitly give the president the authority to fire the commission's members. However, federal courts have held that the president can remove members of independent commissions like the SEC "for cause," including "inefficiency, neglect of duty or malfeasance in office." The president can also demote the chairman of the SEC without removing him or her from the commission.
Thanks to Patterico for the pointer (and hounding the LA Times to issue the correction).

jbn (mail):
Why didn't the media have Sarah Palin explain these technical matters to them?
10.4.2008 10:03pm
Han Solo:
Frankly, I trust Palin's word much more than these talking head airbrain retards in the mainstream media who prove time and time again that they are too lazy to even to do a 5 minute google search to check facts.
10.4.2008 10:32pm
Cornellian (mail):
So is McCain saying just cause exists to fire Chris Cox? Seems a bit of a stretch to me.
10.4.2008 10:58pm
jbn (mail):
Absolutely, her tears cure cancer, too!
10.4.2008 10:58pm
Roger Schlafly (www):
Yes, McCain would be firing Cox for cause. Why else?
10.4.2008 11:12pm
Bill Poser (mail) (www):
It looks to me like the folks who think that McCain does not have the power to fire Cox are not as ignorant as you suggest. They are aware of cases such as Humphrey's Executor and Wiener. The key issue seems to be what constitutes "cause". On their interpretation, McCain is proposing to fire Cox out disagreement on policy or out of pique, which does not constitute cause. Those defending McCain seem to assume that Cox has neglected his office, been inefficient,or engaged in actual malfeasance. Is there really a case for that? I'm not at all happy with how this situation developed, but it sure looks to me like a policy dispute, not negligence on the part of the SEC.
10.4.2008 11:22pm
ticker:
The New York Times asks: How could Mr. Cox have been so wrong?:
“We have a good deal of comfort about the capital cushions at these firms at the moment.” — Christopher Cox, chairman of the Securities and Exchange Commission, March 11, 2008.

As rumors swirled that Bear Stearns faced imminent collapse in early March, Christopher Cox was told by his staff that Bear Stearns had $17 billion in cash and other assets — more than enough to weather the storm.

Drained of most of its cash three days later, Bear Stearns....

Is this enough “for cause”?
10.4.2008 11:25pm
corneille1640 (mail):
Does the statement that the president may fire someone for cause imply any procedural measures that the president must follow before firing someone? In other words, can the president merely affirm that the SEC chair has been guilty of "inefficiency...." etc., or does he have to obtain some sort of finding that proves the charge of cause? I ask because it seems to me that the power to fire for cause is meant to be more limited than the power to fire for any reason whatsoever.
10.4.2008 11:35pm
John S. (mail):
Hey, if Al Davis can make the case of firing Lane Kiffin for cause, I'm sure McCain could as well. Maybe if McCain slicked back his hair and threw on a presidential jump-suit it would have gone over better.
10.5.2008 12:28am
Guest12345:
Cornellian writes,
So is McCain saying just cause exists to fire Chris Cox? Seems a bit of a stretch to me.


I would think that the billions of dollars of FTDed shorts that happen year after year without anyone ending up in the clink is reason enough to clear the bench from the chairman to the bat boy. The fact that they've been scrambling the last month does nothing about the years that the practice has been ignored.
10.5.2008 1:46am
PDXLawyer (mail):
For those of you who, like me, were wondering, an "FTD short" refers to a situation where someone makes a "naked" short sale - a sale of shares without having arranged to borrow the shares to meet their contractual obligation - and then fails to deliver (or FTDs) the transaction.


For myself, I'm wondering why the exchanges tolerate this - why they don't make their member brokers cover these transactions. For every FTD short there must be a buyer somewhere who ends up without the stock she thought she was buying. Seems like this result would undermine people's willingness to use the exchange.

Can someone more fully explain and/or link to an explanation?
10.5.2008 8:31am
Michael Edward McNeil (mail) (www):
Regardless of whether proper “cause” exists for firing the chairman of the commission as a commissioner, the President can demote the chairman to mere commissioner without any cause needing to be shown — thus “firing” him as chairman.
10.5.2008 3:07pm
Jon245:
The president may not have the unfettered right to fire the SEC chairman without cause, but if the president requests a resignation, he almost always gets it. This is how Harvey Pitt was "fired" as SEC chairman several years. Harvey certainly did nothing that would even approach the standards for "cause."
10.5.2008 6:17pm
Alexia:
@PDX Lawyer -

Most people do not actually take physical posession of the shares, so the short is on paper. If I buy the stock, it will show up on my statement. I'll never notice that it didn't arrive.

The broker/dealer who was expecting to see it arrive in their DTC vault will indeed notice it missing, but it ends up nothing more than a number on a report.

Note that they might possibly loan those shares out again, based on the assumption (cough cough) that they'll be receiving them soon. And so on, and so on, and so on.

And that's where Cox is at fault. He is on record as saying that the problem of FTDs was simply too big. According to him, enforcing that rule would have an adverse affect on the market, so he chose to simply disregard the rule.
10.5.2008 10:32pm