Cox in the Crosshairs

The past week has been a weird one. “Most serious U.S. financial crisis since the Great Depression” aside, it was a week when so many previously solid notions and perceptions seemed to lose their moorings.

On Friday, for example, The Wall Street Journal harshly criticized John McCain – the paper compared McCain and his “angry populism” to circa-2000 Al Gore – for slamming SEC Chairman Christopher Cox.

McCain was quoted as saying he would fire Cox if he (McCain) were president for “betraying the public’s trust.” McCain’s reasoning, as quoted in the paper, does sound off the mark: he blamed Cox for letting speculators (a term that sounds a bit like “evil-doers” these days) and hedge funds “turn our markets into a casino” by allowing naked short-selling. Actually, Cox recently curbed naked short-selling, and the SEC’s authority over hedge funds was non-existent to limited until only very recently.

In the past weeks, the Journal’s editorial team has consistently clarified that short-selling is not fraud (rather, fraud is fraud); on the contrary, short-selling adds “valuable information to the market about what investors believe to be the price direction of a stock.”

The events of the past week show that if McCain or his opponent, Barack Obama, demonstrated insufficient grasp of the complexities of the current and future U.S. financial system their personal stock will quickly be shorted by influential opinion-shapers.